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One thing we seem to have been very good at in 2020 was saving money.
Deposits shot up, according to the Central Bank, to a record 123 billion euros.
However, in some ways we “cheated” because there was a clear lack of spending opportunities during the year with stores and services closing for long periods in an attempt to slow the spread of Covid-19.
If we want to continue the habit of saving money after the pandemic, or indeed for those who were not in a position to save money because they may have lost their main source of income this year, we have been looking for some ways to reduce what you spend on. daily products and services.
Shopping around
It is the golden rule. Whether it’s for utilities, broadband, insurance or mortgages, the key is to do some groundwork before deciding on a new provider or if you stick with an existing provider.
A recent Central Bank report pointed to a practice known as ‘dual pricing’ in the auto and home insurance markets, whereby a provider essentially penalizes a customer for their loyalty by charging a higher price for the same product than a new client.
Legislation is being drafted to ban the practice, but rule number one remains in effect; walk the market and you could save hundreds .
Or you can get someone to do the work for you. For a relatively small price compared to the potential savings, a broker will give you access to a wider range of insurers and find the best price for you.
“Never just accept your renewal quote,” advises Deirdre McCarthy of the CFM Group, which includes insuremycar.ie and insuremyhouse.ie among its brokerage brands.
“There are numerous vendors, all competing for business, so it is financially worthwhile to evaluate all the options before committing to another contract.”
McCarthy said clients of CFM’s services would typically switch insurers every two to three years, a practice that is common among brokers, he said.
Home insurance
It is estimated that there are currently around 15 home insurance providers on the market.
Limiting your search to two or three will limit the savings that can be unlocked, which can be significant, with price differentials between € 100 and € 700.
And there are ways to lower the premium even further, for example by assuming a slightly higher excess, checking and considering whether expensive policy add-ons are necessary, and getting an alarm.
It is estimated that an alarm system can reduce premiums by up to 25% and they have become less expensive to install and monitor.
However, be sure to turn it on.
“If you don’t use your alarm, or are prone to forgetting to turn it on and later stolen, there is a high probability that your claim will be rejected,” Paul Kavanagh, Managing Director of McCarthy Insurance Group .ie, explains.
“Your insurer can argue that it has not taken reasonable steps to protect your property.”
Public services and broadband
Again, this is an area where service providers don’t reward you for your loyalty.
In fact, the opposite is the case.
As a general rule of thumb, if you don’t switch providers every 12 months, you’re likely missing out on savings, which according to Daragh Cassidy, Head of Communications at the price comparison website bonkers.ie, could amount to € 450 in a year .
“Most energy providers offer special discounted energy rates for one year to new customers, which then return to standard rates after the contract ends,” he explains.
“There are now 13 energy providers to choose from, so there has never been more choice and more competition between providers for new customers.”
A similar approach applies to broadband and television providers. Note that vendors in this market generally sign customers for a 12-month contract, but special offers may not apply for the entire contract period.
Generally, it is better to change at the end of the contract.
“If you still have a contract, you may have to pay a penalty for breaking your contract and this will vary from provider to provider,” said Daragh Cassidy.
“However, most providers will make you pay the outstanding balance, which is what you would have paid if you had terminated your contract normally. Therefore, it is better to wait until the contract expires,” he advises.
Mortgages and loans
If you decide on just one area to make savings possible in 2021, check with your mortgage provider.
The savings that can be made over the life of a mortgage can be phenomenal.
In Ireland, we still have one of the highest mortgage interest rates in Europe, but rates have come down in recent years due to increased competition among providers and this year, for the first time since the early 2000s, it entered a new international lender on the market. .
Avant Money, belonging to the Spanish banking group Bankinter, began to offer mortgages with a fixed rate as low as 1.95% (available on the basis of a loan with a value of less than 60%) and a variable rate from 2.5% .
Based on a mortgage holder with a loan of € 250,000, which is equal to 80% of the value of the property, and who currently pays a variable rate of 4.5%, bonkers.ie calculates that he could make a potential monthly savings of € 305.43 changing at a fixed rate of 2.2% for five years with Avant.
That equates to savings over the five-year term of the fixed rate of € 18,325.
If you need short-term financing in 2021, the message again is to do your homework early.
“Short-term sources of credit are notoriously expensive and often should be avoided,” said Kevin Johnson, CEO of the Credit Union Development Association (CUDA).
“Using credit cards can be a quick way to get into a cycle of debt that can be very difficult to break free.”
Important numbers to consider when obtaining a loan are what it will cost over its useful life and what the APR (annual percentage rate) is.
Based solely on monthly payments, a five-year loan will look more attractive than the same three-year loan.
However, the cost of long-term credit will be higher, so you will end up paying more. So make sure you get the breakdown of exactly how much you will pay in addition to the loan amount.
Health insurance
Peak renewal period is approaching.
It is estimated that more than 1 million health insurance policyholders will renew their policies in the next three months, with the vast majority in January.
“Despite the fact that all members received some level of reimbursement at the beginning of the year, all fees are increasing across the board,” explained Dermot Goode of totalhealthcover.ie.
“This is because the increases that were announced in January (Irish Life Health average 4.4%), March (VHI average 2%), April (Laya average 1%), October (Irish Life Health average 2.5% ) and Laya, with their latest 2.9% average increase since January 1, 2021, will now impact those people who are renewing in the coming weeks, ”he said.
The general rule of thumb here is that according to Dermot Goode, if you’ve been on the same policy for more than 3 years, you’re likely overpaying.
Research from totalhealthcover.ie found that around 2 out of 3 health insurance members are potentially on the wrong plan and most likely overpaying for their level of coverage.
The Health Insurance Authority has a price comparison generator on hia.ie and don’t be afraid to call your existing insurer and ask if there is a better plan available to you with the same level of coverage and for a lower price.
If you are approaching your 30s and haven’t purchased a health insurance policy yet, it may be a good time to consider doing so.
A 2% penalty is applied for each year older than 34 years to a new market participant.
Next week
In Part 2 of this personal finance review next week, we’ll look at how to save in everyday banking, claim taxes, and potential options for spending excess savings on projects that will produce long-term returns. .
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