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Resolutions to beat the recession blues

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Recession-themed graffiti by Dublin artist Mazer in the Portobello area of Dublin

Recession-themed graffiti by Dublin artist Mazer in the Portobello area of Dublin

Recession-themed graffiti by Dublin artist Mazer in the Portobello area of Dublin

By making a few financial changes this year, you can really help ease the pinch.

Claim a tax refund

You can claim tax relief on medical expenses you pay yourself and on behalf of any other person.

Money spent on medical treatments last year can be claimed at the higher tax rate for those paying tax at this rate, but expenditure incurred this year can only be claimed at 20pc. This means if your family incurred costs on certain doctor and consultant fees, dentist fees and drugs or medicines prescribed by a doctor you can make significant tax savings.

The relief is granted at the claimant's top rate of tax, so those liable for tax at 41pc will get 41pc of their medical expenses back. So a higher rate taxpayer who spent €1,000 on medical treatments last year can expect to get €410 back from the taxman.

Those lower income earners who are liable for tax at the standard rate only get a 20pc refund, while those who are not liable for tax at all because of their low incomes have to bear the full cost of their medical expenses.

Medical expenses relief covers most medical expenses incurred by the taxpayer and his or her dependants. You can ring the Revenue Commissioners on 1890 30 67 06 and leave a message asking for the relevant forms to be sent to you.

Switch your credit card

The deepening recession means now is a good time to find a better deal on your credit card.

Interest rates on Irish credit cards are deplorably high, with some notable exceptions.

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If you decide you want to control your card spending, then one good option is to transfer the balance to one of the zero-interest credit cards.

Shifting your debt to a zero-interest credit card will give you a bit of breathing space.

But be warned: if you do not pay off the debt during the introductory zero-interest period, you will be absolutely sucked dry by the bank or credit card company.

Once the introductory period is over on some cards, you will be hit with a penal rate of interest. For example, Ulster Bank's standard card has the longest zero-interest rate at nine months, but you will be clobbered with a rate of 17.9pc when that period is over.

Personal finance writer Colm Rapple in his new book, 'Family Finance 2009', warns that zero and low-interest rates on cards should be seen for what they are -- marketing ploys.

Six card providers have zero interest rate deals. These are Bank of Ireland, First Active, Halifax, National Irish Bank, Tesco and Ulster Bank. Other providers have low interest rates. For example, Permanent TSB's Ice card has a rate of 2.9pc for balance transfers.

Get cheaper insurance

There is fierce competition in the home and motor insurance market, which makes it essential that you shop around for the best deal. Huge savings can be made without suffering any loss of cover.

You would be foolish to assume that renewal quotation sent to you by your existing insurer is the best you can get. Ringing around insurers or speaking to a broker will usually mean you can knock a big sum off your insurance costs.

Switch your mortgage

The mortgage market has become more competitive over recent years and there are differences in the interest rates being offered by the main providers.

Switching mortgages could save you a lot of money over the long-term. Get financial advice from an independent adviser.

Reduce your spending

Avoid wasting money. Try to cut back on some non-essential regular purchases such as the morning coffee or going out, but be realistic.

Paying €2.50 for a cappuccino every day in work can add up to around €600 a year. So cutting out luxuries like this can add up over the long term.

Introduce a budget and stick to it. This will help you manage your expenses more easily while allowing you to work out how much you can afford to save regularly.

Dynamite your debt

Even overpaying a small amount -- the price of a cup of coffee -- means you can do serious damage to your debts. Large amounts of money will have an even more dramatic impact on your debts.

For example, if you have seen your mortgage repayments fall from the three rate cuts last year you could deflate your credit card or car loan debt by putting some of the money you have saved to accelerate you debt repayments.

If you apply this idea to overpaying your mortgage, this would have the effect of squeezing the life out of your mortgage.

Earn money from your current account

Most banks will now pay you interest on at least some of the money in your current account.

This is a sea-change from a few years ago when banks charged you money to operate a current account. But consumers need to be careful, most banks impose restrictions.

For example, the Halifax current account pays 10.47pc interest on balances up to €2,000 if you lodge €1,500 to your account each month. You don't have to keep it there for the entire month.

Let the Government invest in your pension

Every year the Government pumps about €2.8bn into the pension funds of people with private pensions.

It works like this: for every €100 a higher taxpayer invests, those generous people in the Government will top it up with €47.

And the money invested can grow tax free. What's more, when you retire you can draw down 25pc of the pension fund tax-free.

Family income supplement

If you are a low-income earner with dependant children, you may be entitled to the Family Income Supplement.

Unlike most social welfare benefits, it is paid to those at work. Check out the Department of Social and Family Affairs website www.welfare.ie.

Travel tax free

There are not too many things in life that you can get tax free. But public transport tickets are one of those items you can get without a cent going to the taxman.

The scheme involves employers providing employees with bus and rail commuter tickets. The employer saves on PRSI, while employees save on tax and PRSI payments. Employees participating in the scheme benefit from reduced tax and PRSI payments of up to 47pc.

Employees receive tickets either as part of their salary package (salary sacrifice) or in lieu of an annual bonus. Savings arise because tickets are not subject to tax or PRSI.

Save tax free

There are various ways to avoid paying DIRT tax (which rises to 23pc from this month) on your savings -- by, for example, putting your money into savings certs, national instalment savings and special term accounts.

Take special term accounts. These are offered by credit unions and the likes of AIB and Bank of Ireland.

For example, if you put a minimum of €6,000, and a maximum of €25,000, into a three- year special-term account with AIB you will get interest of 3.10pc AER (annual equivalent rate).

With special-term accounts, you are entitled to receive the first €480 interest earned a year DIRT (deposit interest retention tax)-free for a three-year account and €635 DIRT-free for a longer-term account.

Shop online

Online stores often give a discount as they don't have the same overheads involved when selling online. Search for the goods you want using a search engine or ask the retailers themselves if they have an online store.

Haggle

We have forgotten the art of haggling, but retailers are much more eager to bargain in these recessionary times. With the exception of grocery outlets, most retailers will not let you leave the shop if you offer them a cash amount lower than the display price.

If a retailer isn't prepared to haggle, then simply take your business elsewhere.

Tap your credit union

Start saving with your credit union. Despite the Government bailout, it will be extremely difficult to get a bank loan in 2009.

Unlike banks, credit unions have lots of cash but have not been able to loan out in the past few years.

In other words, most credit unions are under-lent, with their loans representing less than half of members' deposits and shares.

If you haven't already joined your local credit union, do so now.

Buy a book

If you want to get a grip of your finances this year then buy either Colm Rapple's 'Family Finance 2009' (Squirrel Press, €11.95) or the '2009 TAB Guide to Money, Pensions and Tax', co-authored by Jill Kerby (€15).

Also worth doing is checking out www.askaboutmoney.com.


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