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FOR many of us, the harshness of the sixth austerity Budget to hit the country only really sinks in this month. Pay packets will be slimmer, child benefit payments smaller, and motor tax higher. The countdown to the dreaded property tax – set to kick in this July – also begins.
With so much doom and gloom, it makes sense to start the New Year on the right financial foot. Five simple steps could save you €1,500 this year.
BUS FARES SAVE €500
If you're planning to get fit in the New Year by cycling to work, you could save as much as €520 on the cost of a new bike under the government's cycle to work scheme, according to Brian Keegan, director of taxation with Chartered Accountants Ireland. "Under the scheme, employers can buy a new bike and bike equipment up to a total value of €1,000 on behalf of an employee – without the employee incurring tax on the benefit received," said Keegan.
If you've a tendency to get a puncture every couple of days, ensure that your employer buys plenty of puncture repair kits under the scheme. Puncture repair kits – as well as cycle tool kits, helmets, lights, pumps, reflective clothing, locks, bells and mirrors – are amongst the equipment which you can claim tax relief on under the scheme.
As long as the conditions of the scheme are met, you won't have to pay any tax, PRSI or universal social charge on the cost of the bike or bike equipment your boss has bought on your behalf. So if you're on the higher rate of tax, the tax break could be worth as much as 52 per cent of the cost of the new bike and equipment, said Keegan.
If you'd rather hop on the bus, train or Luas than cycle to work, you can still get as much as 52 per cent of the cost of your annual transport back through a tax break – as long as you buy your ticket under the Tax Saver scheme. The scheme covers annual travel on Dublin Bus, Bus Eireann, Irish Rail and the Luas.
If you're buying the annual Dublin Bus Travelwide ticket for example, you'll usually pay €1,120 for the ticket. However, if you're a higher-rate taxpayer, you'll only pay €537.60 for the ticket under the Tax Saver scheme – saving yourself €582.40, according to Keegan.
Your employer must buy the ticket for you – and you usually then repay the cost of the ticket by sacrificing some of your salary.
BANKING SAVE €100+
With free banking a distant memory for most of us, one of the best ways to cut back on bank charges in the New Year is to stop going into the red.
"Overdrafts – especially those where you go over your overdraft limit – should be a no-no," said John Lowe, managing director of Providence Financial Services and author of The Money Doctor guides. "Apart from the high interest rates and the overdraft arrangement fees – which are often about €25, once you have gone over your overdraft limit, referral fees, surcharge interest and unpaid fees kick in."
The fees for going over your overdraft limit – or going into the red without having an overdraft set up – could easily add up to €110 a year.
If you go over your limit ten times a year for example, you could pay €50 in referral fees alone. Referral fees are usually between €3.50 and €5.15 a go – although Bank of Ireland will hit you with a referral fee of €10 if you go over your limit more than six times in three months.
Unpaid item fees, which are charged when you don't have enough money in your account to clear a cheque, standing order or direct debit, could also burn a hole in your pocket. "With unpaid fees, you can be charged as much as €12.70 a go," said Lowe. So if you write a load of cheques this year – and five of them bounce – you could easily pay more than €60 in unpaid fees.
On top of this is the surcharge interest you're hit with for going over your overdraft limit. With surcharge interest, you could pay as much as 12 per cent interest on top of the interest you are already paying on your overdraft. Surcharge interest could therefore easily bring up the overall amount of interest you're paying on an overdraft to a hefty 28 per cent.
LANDLINE SAVE €309
If you've got a mobile phone and rarely make calls at home, consider ditching your landline. If you've an Eircom home phone and you haven't signed up to any of the company's bundled packages, chances are you're paying line rental of €25.78 a month – plus the charges for any calls you make on your home phone. If you don't want to rely on your mobile or you spend a lot of time at home, it could be worth opening a broadband account – and investigating ways to make cheap phone or video calls over the internet. Some ways of doing so are Skype (www.skype.com) or Google+ Hangouts (www.google.com /+/ learnmore/hangouts/).
ENERGY SAVE €240
You could knock hundreds of euro off your energy bills this year by switching to a cheaper provider. Your gas and electricity bills could also work out cheaper if you pay by direct debit rather than cash or cheque – or if you receive your bills online rather than in the post.
"As sure as Christmas comes in December, our biggest energy bills come in January – so it can be a good time to do something about it," said Simon Moynihan, communications director of the personal finance website bonkers.ie.
"Moving from standard rates to the cheapest deals can save an average household more than €20 per month so it's worth it. Even customers who've switched before should check prices every year because most discounts last for just 12 months.
"Getting a better deal doesn't always mean switching either. Most suppliers have "retention" deals where better rates are made available to keep customers from switching. All you have to do is ask."
Some of the gas discounts on offer include Flogas's 15 per cent discount on Bord Gais rates – which is available to those switching to Flogas who pay by direct debit. Airtricity offers a gas discount of up to 23 per cent on Bord Gais's rates.
Among the electricity discounts available are the 11 per cent discount to those switching to Electric Ireland. If you're already with Electric Ireland for your electricity, you can get a discount of 6 per cent if you sign up to online billing and pay your bills by direct debit. Airtricity offers an electricity discount of up to 14 per cent.
Before you switch to another provider check its standing charge as this could push up the overall cost of your bill for the year. If you're switching to Flogas for gas for example, you'll pay an annual standing charge of €81.71.
You should also check if you must stay with your provider for a certain amount of time to be eligible for the discount. Some of the best Airtricity discounts for example are only available if you sign a two-year contract.
MORTGAGE SAVE €400
If you could pay an extra €50 off your mortgage repayments a month, you could save hundreds of euro in mortgage interest a year. You will also pay off your mortgage a few years earlier.
Let's say you've a 25-year mortgage of €150,000 and you're paying 4 per cent interest. On that rate, your monthly repayments are about €786 a month and the total cost, after 25 years, will be about €236,000. If you can pay an extra €50 a month off your mortgage, you'll reduce the overall cost of your mortgage to about €226,000, saving yourself €10,000 over 25 years – or about €400 a year. You'll also pay your mortgage off about two-and-a-half years earlier.
