The Guide Top Ten: Holiday's over - high time to give your finances a much-needed fitness check

Published on Thursday 6 January 2011 15:47

Along with eye-watering credit card statements and new gym memberships, January brings the chance to regain control of your bank balance. Gavin Littlejohn, chief executive of MoneyDashboard.com, offers his tips for detoxing your finances after the festive splurge.

1 Sort out your pension

If you haven't started investing in a pension, it's time to get a move on. To find out how much you need to save each month for a secure retirement and the cost of delaying things, visit getarealitycheck.co.uk.

If you've turned down the chance to join your employer's scheme, it's worth thinking again. By opting out you're missing out on tax breaks and the extra contributions your employer will to make into your pension for free.

If you don't have access to an employer's scheme and you're not sure what kind of pension to choose, check the beginner's guide to pensions at www.directgov.co.uk or seek advice from an independent financial adviser (IFA). To find an IFA near you, call 0800 085 3250 or visit www.unbiased.co.uk.

2 Take tax breaks

Make the most of your individual savings account (Isa) tax allowance for 2010/11 ahead of the 5 April deadline. You can invest 10,200 in Isas, including 5,100 in a cash Isa. And remember, if you're coming into a lump sum, the amount of tax-free income you can put into your pension falls from 255,000 to 50,000 in April.

3 Read your statements

Get into the habit of checking your bank and credit card statements when they arrive. That way you can quickly pick up any irregularities and build up a realistic idea of your spending pattern.

Or you could use an online aggregator site like moneydashboard.com to show you the true picture at any point in time automatically.

If you have stocks and shares, ISAs or other investments, including a pension pot, check how they are performing, too.

If you're not sure about what funds you should invest in, it makes sense to seek advice.

4 Get the best rate

With inflation rising and interest rates still at a record low it's more essential than ever to ensure you get the best possible savings rate on your account. Visit moneyfacts.co.uk and other comparison sites to see if you can do better and consider alternative kinds of savings account in the process.

You will get a much better return if you're able to lock some of your money away for a few years. The latest Bank of England statistics show that while the average return on an instant access savings account is 0.23 per cent, on a notice account it's 1.4 per cent, on a Cash Isa it's 0.4 per cent and on a fixed rate bond it's 2.51 per cent.

5 Love to budget

Make 2011 the year you budget on an ongoing basis, keeping a note of everything you have coming in and going out and planning accordingly. It's the only way to keep your finances are under control and get on track for a financially secure future.6 Escape from debt

If you've run up a debt over Christmas make sure you pay it off as quickly as possible. Set a budget, tighten your belt and get everything back under control. If it's a credit card debt, then try to make more than the minimum payment each month, so you avoid a penalty and pay the debt off quicker.

7 Credit cards

If you're not paying off your credit card in full every month, make sure you have one of the lowest interest rate cards on the market.

Alternatively, see if there's a good balance transfer deal on offer. That way you could transfer your outstanding balance to a new card and avoid paying any interest for as long as a year and a half. That should give you time to pay off debt.

8 Review your insurance

Do you have the right insurance policies in place? Do you need them all? If people depend on you, one of the most important things to insure is yourself. Life insurance is one of the cheapest insurances you can buy. So if you don't have life cover in place, but do have other insurances, then it really is a case of thinking about what's more important to your family - you or your mobile phone? Make sure you check for areas of duplication too. For example, if you have mobile phone cover, your phone may also be covered under your contents insurance.

9 Manage your mortgage

Check to see if your mortgage rate is still competitive. If it's not, it could make sense to switch right away, even if there is a penalty clause. It's not as easy to switch mortgages as it used to be, but it's still possible so it's well worth reviewing. Keep an eye on the fees, which can vary hugely and make a big difference to the true cost.

10 Switch your energy tariff

According to uSwitch.com, consumers who switched utility providers regularly over the last five years saved over 1,000. Online plans tend to be cheaper, so is paying by direct debit. So why not get surfing and find the best deal? You should have received your first annual energy statement which should make comparisons easier.

At the same time, see what suppliers are doing to help you save money. Scottish Hydro Electric, for example, will give you a cash credit if you reduce your annual consumption and/or switch to paperless bills.