Six ways to detox your finances in 2020

Now the Christmas lights have been packed away for another year, some of you may be worrying about how much you’ve overspent on the festivities, so now’s the perfect time to look at ways to get your finances back into shape.

If you’re prepared to put in a little time and effort you can make 2020 the year that you regain control of your money matters and restore some order to your finances.

Here you’ll find six tried and tested suggestions to help you knock your finances into shape by reducing your borrowing costs and helping you get back on track.

1. Ditch and switch those expensive credit card balances

If you’re like a lot of people after Christmas, dreading the monthly statements for your store cards and credit cards and know you’ve splurged too much on buy now pay later credit, January is the ideal time to save some serious money and focus on reducing your debts.

For example if you’ve got £2000 spread across your cards at an average interest rate of 19% APR, and paying back 5% of the balance each month, it’ll take you almost nine years to clear the balance and cost you more than £835 in interest charges.

Simply by switching it to a 0% balance transfer card and paying off £100 per month, you’d be debt free in just over a year and a half and all it would have cost you will be the one off balance transfer fee of approximately £60.

Some of the best deals include 29 months at 0% and 3% balance transfer fee with Sainsbury’s Bank or alternatively you could opt for a shorter term of 18 months with Barclaycard with no balance transfer fee.

2. Amalgamate your debts with a low rate personal loan

If you find it too difficult to keep track of your credit card balances, the size of your overdraft or repayments on  your store cards or car finance, maybe it’s time to consider amalgamating all your borrowing with a single personal loan.

Interest rates are still really low, so it’s a good time to rejig your debts and start seeing them shrink month by month.

If you’re going to go down this route, make sure that once you repay any card balances that you destroy the cards and close the accounts completely. The last thing you want is to have restructured your debt and then get back into bad habits by running up new debts on your plastic.

 

3. Move your mortgage to one of the ultra-low rate fixed deals

With mortgage rates at near record low levels, now’s a smart time to fix your payments for the next few years, especially as some experts feel that rates may start to increase in 2020.

With the average standard variable rate at around 4.9%, if you’ve got a £100,000 mortgage and 25% equity, you could switch and take advantage of the five year fixed rate from First Direct at just 1.59% with a £490 fee.

Based on 20 years mortgage term left to run you could cut your monthly repayments from £654 to £487 – saving you £167 per month and a massive £9530 over 5 years even allowing for the £490 fee.

Always refer to an independent mortgage broker to find you the cheapest mortgage for your circumstances. There are thousands of products to choose from and with a bewildering array of interest rate and fee combinations, you don’t want to choose the wrong deal – it could be a costly mistake!

4. Wipe out that overdraft once and for all

If you’re constantly in the red, maybe it’s time to take decisive action to clear it once and for all. If you’re £500 overdrawn for at least three weeks of every month, you could end up paying £20 per month in charges with some banks, that’s a hefty £240 hole in your budget you could do without.

If you opt for a credit card offering a 0% money transfer from Virgin Money, MBNA or Tesco Bank, you can transfer some of your credit limit into your bank account to wipe out your overdraft.

With the interest rate at 0% if you pay £20 per month to the card instead of to the bank in overdraft charges, you’ll have wiped out your overdraft debt in just over two years and that includes the one off money transfer fee of approximately £15 (3%).

5. Loyalty doesn’t pay when it comes to insurance

The golden rule is to NEVER accept the renewal quote from your home or car insurance provider.

Shop around every year when your renewal notice comes in and move if you can get the same cover for a cheaper price unless your current provider is prepared to price match (it’s sometimes worth a call to do this as it saves you the hassle of changing providers).

It’s definitely worth spending 20 minutes of your time shopping around – I’ve just carried out a new quote for myself via a comparison site. I currently pay around £240 per year for my car insurance, but rather than take the convenient route and renew automatically, I searched online and then checked out Aviva and Direct Line which are not on these sites and the latter ended up saving me over £40 on my annual premium.

6. Are you paying over the odds for your life cover?

The cost of life insurance has fallen by nearly 30 per cent over the last decade, so there’s a big opportunity to cut your costs.

If you have life insurance that you took out a number of years ago, there’s a good chance that you could reduce your premiums simply by taking out a replacement policy from the likes of leading online broker www.cavendishonline.co.uk

It’s not unusual for people to cut their insurance costs by £20 per month or more in some cases, so it’s worth spending a few minutes online to see how much you could save.

There are a couple to bear in mind before you switch your policy:

• Check that you’re not giving up any special benefits on the original plan which aren’t included on the new policy.
• To avoid having a period without any cover in place, don’t cancel your existing policy until the new one is up and running.
• If you’re a lot older now than you were when you originally took out your policy, or your health has deteriorated, a new policy could prove to be a lot more expensive. If that’s the case, you’re probably best to stick with the policy you’ve got.