With long evenings and the clean slate of a new year, Eoin Clarke, Managing Director of price comparison and switching site Switcher.ie believes January is the perfect time to declutter your finances, break bad spending habits and detox your debt. There's never a bad time to review your spending but doing it as the Christmas bils come due provides extra incentive.
With that in mind, Mr Clarke offers some advice on how to tackle that financial hangover and make lasting changes to the way you manage your money in 2021.
The first thing to do is get a clear picture of your current situation.
"Start with a hard look at your income and outgoings," Mr Clarke says. "List all your bills, subscriptions, debts, insurances and other regular expenses. Be honest with yourself and highlight areas you can change.
Next, he suggests you check your credit score.
"The higher your credit score, the better your chances of getting a mortgage, car finance or loan. Your credit report will help you spot any problems and help you manage your finances in future."
You can check it by signing up to the Irish Credit Bureau (ICB).
"There’s a simple application form to complete on the ICB website (printable version also available) to check your credit rating for free," Mr Clarke says. "You'll need to provide accurate personal details including previous addresses, in order to get a full report.
There is also a printable version of the form available to apply by post. Bear in mind that due to COVID-19, there are currently delays in processing credit report applications.
If you have overspent at Christmas, tackle it head-on. Having a plan to back what you owe will give you peace of mind.
"Expensive interest charges can add to your balance, so check if you could save by taking out a balance transfer credit card to get extra time to repay debt," Mr Clarke suggests. A number of Irish card providers offer consumers the opportunity to transfer the balance from their existing card and pay low or no interest for a set period (usually 6-12 months). This would allow you to clear the debt without incurring interest.
"Compare deals to find the right option for you and look for the longest 0% balance transfer period, to give you as much time as possible to pay off your debt, interest-free. If you need to make purchases too, some balance transfer cards also come with a 0% interest period on purchases.
"You should also look for a low typical APR as this is the interest you’ll be charged on any outstanding balance when the interest-free period has ended."
Mr Clarke also wants to highlight the benefits of cutting energy costs.
"Energy bills take a sizeable bite from any household budget, so it’s worth looking at ways to cut down energy use at home and how you can cut your costs by switching your supplier," he says.
Consumers can compare prices for for gas and electricity as well as broadband, digital TV and mobile phone plans at Switcher.ie.
Next up, the biggest outgoing of all in many houses, the mortgage.
"If you’re on a standard variable rate mortgage, chances are you’re paying more than you need to," Mr Clarke says. "Talk to your mortgage provider or broker, free of charge, about changing to a fixed-rate deal and make the most of lower interest rates.
Why does he think fixed-rate mortgages are a good option?
"A fixed-rate mortgage enables you to budget better as you’re guaranteed set payments for a fixed term," he says. "You can choose to fix payments for a short or long term to suit you e.g. two years or for five or more years.
"Shorter-term fixed-rate mortgages usually offer a lower rate than longer-term products, but having stability for longer might suit you better."
Mr Clarke's final suggestion is to do an audit of your current subscriptions.
"Spending more time at home has caused a surge in signups to TV streaming and other digital entertainment services," he says. "Check how much you’re spending and review how often you watch, listen or play each app to see if they’re worth paying for."