Blow Out Cobwebs by Putting Your Finances in Fighting Shape
Monday 9th January 2006
by Bill Tyson, Personal Finance Editor
Inertia costs you money, and if you don't have a competitive mortgage deal, it is your biggest waste. Fight off financial flab and get the best deals for your precious cash.
HAVE you resolved to sort out your finances as a New Year's resolution? You could save yourself thousands every year with a handful of commonsense measures.
1. Review your mortgage rate by checking it against the best deals in our Good Buys table published on Thursday.
If it is out of line, ask your lender to give you a better deal or look at switching to a new one.
Borrowers with National Irish Bank can still get surprisingly low fixed-rate deals.
NIB still has not put up its fixed rates, and two and three-year deals are still available at 3.29pc and 3.45pc.
These are already less than all standard variable rates - and interest rates are expected to rise!
If you are a new borrower, however, there may not be time to put through your mortgage before rates go up.
2. Make sure you get all of your tax-free allowances.
Neglected reliefs include those for trade union subscriptions, medical expenses, annual bus or train passes and pension investment.
A form outlining your credits and allowances for the year should be arriving shortly.
Go through it carefully and check that you are getting all of the credits and allowances to which you are entitled (you can check these on www.revenue.ie).
3. Bump up your SSIA contributions to the maximum of €254 a month. If you have a year to go on your SSIA, you would get an effective return of 25pc per annum from the Exchequer's contribution alone.
4. If your credit card bill has gone through the roof, switch to a 0pc or low-interest alternative to minimise the interest. Check our Good Buys table or www.financialregulator.ie.
Permanent tsb's ICE card is currently cheapest at 9.9pc.
5. Make the most of your savings. Northern Rock and Rabobank pay up to 3.25pc and 3.2pc respectively.
If you have €100,000 on deposit earning only 0.5pc (paid by some other banks), this will cost you €2,700 each year compared to the best deals.
6. A covenant saves tax at 22pc when you agree to give some of your income to someone else for a number of years, explains David Robb, of financial advisers Acumen & Trust.
If you are a top-rate taxpayer, you could consider covenanting 5pc of your income to persons age 65 or over.
The recipient of the covenant money will be taxable on the payment.
However, if they have no taxable income they could receive a tax refund of 20pc of the covenant.
7. Mr Robb also advises that if you are due a tax refund, submit your return early. Revenue forms are available from www.revenue.ie or by phoning your local tax office.
8. Acumen & Trust also recommends pension-backed mortgages for the self-employed and proprietary directors.
Rental income can be offset against interest, while the capital sum is repaid from your pension fund at retirement (you can take only up to 25pc of a pension fund as a tax-free lump sum, so bear this in mind re mortgage capital repayment).
9. Make a will if you have not yet done so. It doesn't cost that much (€50 plus VAT) and it can be arranged very quickly.
10. Shop around for insurance. John Geraghty of LABrokers.ie gave us a mortgage protection quote for a typical couple (for a male aged 35, smoker, and a female, aged 34, non-smoker, borrowing €250,000 over 35 years).
The cheapest was €597.30 a year (Caledonian Life), which cost €231.95 less than the dearest. That difference would be payable every year for 35 years, which means you could save €8,118.25 over the term of the policy.
Similar savings can be made for life, motor, home and travel cover.
And it's not hard to shop around. Check out www.financialregulator.ie and our Good Buys table.
Original Article: Irish Independent
