Give yourself a money MoT
- Why it's a good time to inspect your finances
- Take your finances to a money mechanic
- How to check your credit rating
Now is a perfect time to give ourselves a money MoT - and if you make the right kind of savings, the result can add up to something much bigger than a cashmere jumper. We’re talking new car big.
Here are the essential elements of your 2021 money MoT so you can start year lighter, leaner and in top financial performance.
Let’s start with your banking and savings rates
Savings rates are at rock bottom now, so it’s even more important to move your money to where it could make more of a return with higher interest rates.
Start with your bank account. If you’re being charged too much for overdrafts or you’re not impressed by their service, make money and improve your banking experience by switching. Not only are there lots of new accounts to choose from, including the increasingly popular digital banks such as Starling, Monzo and Revolut, but many of the high street banks are offering cash rewards of up to £180 to switch.
See what’s on offer on a comparison site like Moneyfacts or Moneysupermarket.
Then check your savings. Most of the usual savings accounts offer pathetic rates, but if you have an appetite for risk you could move some of your money into one of the social lending platforms such as Zopa, Ratesetter and Funding Circle which offer between 3.5-7% in interest. They are a bit riskier but at least you could have a portion of your savings there making a bit more money for you while you do your best to keep the rest in the least-worst-paying savings account. Again, check Moneyfacts or Moneysupermarket to find those.
Inspect your insurances
Now this really is a game-changer if you have stuck with the same car insurer for the last couple of years. Insurance companies generally put your annual premium up as a matter of course each year, so there are big savings to be made by refusing to accept the latest increase.
There is a lot of competition in car insurance so you are likely to save money even if you stay with your current provider just by demanding a better rate. If you haven’t switched it for a few years you should be able to save hundreds by shopping around a little on one of the comparison sites like GoCompare or Comparethemarket.
There are other ways to bring down your car insurance too, like having black box technology installed to monitor your driving - particularly helpful for new drivers with little driving history.
You could even consider studying for the Advanced Driver’s Test as many drivers who pass this test find that their insurance premiums are positively impacted. It’s available from a few societies including the Institute of Advanced Motorists, the Royal Society for the Prevention of Accidents and the Driving Instructors’ Association and many more.
Next up - Check for damage to your credit rating
If you’re planning on taking out a car finance agreement, PCP, loan or credit card this year, your credit rating will need to be as clean as a whistle. Anyone can get a copy of their credit report for just £2 from one of the main credit referencing agencies such as Equifax, Experian or CheckMyFile.
Checking your credit report will show you if anyone else is taking out loans in your name and if you see anything about your credit history you don’t agree with you will be able to put a correction on your file.
Look under the bonnet of your mortgage
You could save literally thousands by switching your mortgage right now. There are amazing deals around right now as lenders compete for your business - freeing up that vital cash for a new car.
Some of the deals can be complicated, though, with high set-up fees and exit fees that could make the enticing interest rate less worthwhile in the long-run so get some advice from a mortgage broker or financial advisor. Try one of the online mortgage brokers to see how much you could save per year, such as Trussle, Burrow or MortgageGym. Over the time of the loan you could potentially save tens of thousands.
Now it’s time to check the pressure on your monthly finances
This part takes a bit longer as it’s about taking stock of where you’re overspending day-to-day and cutting the fat.
Get your bank statements out (or look at them online) and see where your money is going. Is it visits to restaurants that are eating into your savings? Or should you cut back on the hairdresser and manicurist? Are you buying drinks for everyone to make yourself popular, but neglecting your bank account? Be honest about your spending and see what really should be cut back to free up money for short-term and long-term savings goals.
And what about the car? Is that guzzling too much petrol and stripping you bare every time something goes wrong with it?
Are you getting petrol that is more expensive than it needs to be? You could use an app like Petrolprices.com to find the best rates in your area.
Making a simple swap from the petrol station on your way to work to the one five minutes out of your way could save you hundreds of pounds over the course of the year so is definitely worth considering.
While we’re in the driving seat - consider if it is time to upgrade to a newer, more economical vehicle. Now is a fantastic time to get a different car, whether new or second hand, as dealers have extra cars on their hands that they want to get rid of before the number plates change in March.
There are serious deals to be had and some of the handy tools at heycar can help you choose the best and most economical for you. Check out this handy comparison page. Also see how much you could get for your current car if you trade it in here. heycar has also just teamed up with motorway.co.uk so you can now sell your car online.
Make your driving even more economical by getting into car sharing so that other people pay some of the cost of your petrol. Sites like Blablacar put you in touch with people who want to travel where you’re going. It could be a one-off trip or a regular commute. You will get a driving buddy to split the cost of your journey - and if that takes you into the congestion zone that’s half the charge.
Take your finances to the money mechanic
If you’re wondering about the state of your pensions and investments, or considering how best to manage things for your family, it’s worth paying for an independent financial advisor to give your money a really thorough service.
Ask friends and family for recommendations for a good one or, if they can’t help, try VouchedFor which has financial advisors in your area who are recommended by other users. The first session with a financial advisor is free so you can try out two or three to see what you think of them before committing to paying their professional fees. It’s worth doing, though, as paying a few hundred pounds now could improve your finances by thousands in the long-run.