20 Ways to put SMACHT on Your Money…

Mortgage Matters

If you are lucky enough to have a Tracker Mortgage then do no more. Consider yourself fortunate that you’re “getting your own back” on the banks who were quick to sign people up for these mortgages a number of

years ago.

If you have a more traditional Repayment Mortgage, and if your cash flow permits, consider increasing the monthly repayment amount. The banks won’t like you doing this but provided you haven’t formally fixed the interest rate or the repayment amount there’s nothing they can do to stop you. The effect of increasing your repayment will be to reduce the capital sum borrowed quicker, lowering the amount of interest you have to pay back and ultimately shortening the period of the mortgage.

Got a Lump-Sum Recently?

Did you receive a Lump Sum payment recently – perhaps from a golden handshake, redundancy or pension lump sum on retirement? Rather than invest the sum in a low interest bearing Deposit Account consider lowering all your debts and borrowings first. Ensure the car loan, credit cards, mortgage and personal overdraft are paid off first. The reason? The cost of borrowing funds is always higher than the interest the banks will “reward” you with for your savings.

Flexible Friend

Ensure your monthly Credit Card bill is paid off by the due date. Interest

is applied to outstanding Credit Card balances which remain outstanding usually at rates upwards of 16-20%. It would be cheaper to use a personal overdraft (usually available at an interest rate of 12.5%) making sure you clear your monthly Credit Card bill.

Do not use your Credit Card to draw out cash from the ATM Cash Dispenser except in extreme emergencies. Most cash dispensed from ATMs using a Credit Card is subject to a separate charge. Once again, try to use your Laser Card or withdraw the cash directly at a bank branch – it’s cheaper.

Join the Diesel Revolution

When you think of a diesel engine, do you still visualise the rattling noisy smoke inducing engines of the 1980’s and 1990’s? Think again. Diesel engines have gone through a revolution in the past five years or so and are much quieter and more efficient than ever before. Top marques like Opel (Ecoflex); Ford (Eco Mode); Volkswagen (Bluemotion) and Toyota (Leanburn) have now developed diesel engines for cars up to their large family saloon category with many of these models qualifying for the Band A Car Tax rate – currently €160 per annum.

Oh, and yes, diesel is not only cheaper to buy at the pumps – it goes much further than petrol and does less harm to the environment.

The Cheque is in the Post

Tucked away quietly in some obscure sections of the Finance Acts over the past few years, the Government has introduced a 50 cent stamp duty on every cheque you write. In addition, your bank will then charge you a further transaction fee for every cheque you write. Overall then, writing each cheque could cost you an additional 75 cent. Consider paying your bills online instead.

Travel Insurance

Going on holidays? Travelling outside the country? Don’t be fooled by the Travel Insurance offered by your travel agent, booking website or airline. Not only will this kind of cover tend to be more expensive, usually the period of insurance is ring-fenced to the time you are actually away. Consider instead a Multi-Trip Travel Insurance policy offered by the VHI (€49 per individual or €95 for a family for a whole year); Allianz (€100 to €110 per family per year); AA Insurances (€100 to €110 per family per year).

Gifts and Inheritances

Thinking of making some large gifts to your family and relations or planning your will? Don’t forget to make clever use of the tax free thresholds – basically the bands free from tax where Gift/Inheritance Tax (Capital Acquisitions Tax) does not apply.

Currently, you can gift or leave €250,000 to each one of your children (including adopted children, step children and certain foster children); €33,208 to each grandchild, brother, sister, niece and nephew and €16,604 to each “stranger in blood” before they will have a penny to pay in tax.

Utilise Your Utilities – Consider the “Big Switch”

There is an ongoing price-war being waged amongst all your utility providers. For most of 2009 and 2010 Bord Gais and Airtricity were quoting prices to provide you with electricity that were on average 17% lower than the ESB; Vodafone O2 Meteor and 3 Mobile are engaged in a constant battle for our mobile phone affections and have you considered looking at charges for your waste removal or satellite TV service? A number of waste and recycling companies have revolutionised thinking about waste removal with the consumer benefitting. Look at those bills and shop around!

A Trip to the Supermarket?

Be on the look out for special offers on sale at your local supermarket. To stimulate sales, many companies are now offering 3 for the price of 2 deals, or offering a larger product for a slightly higher price – Kelloggs cereals are often sold in 750g and 500g boxes with the 750g boxes not costing 50% more than the 500g box for instance.

If you get confused as to which products represent better value, (and let’s face it, it’s easy get very confused in a supermarket especially with kids in tow!), have a look instead at the shelf label – supermarket products are usually expressed on the shelf label in price per kg’s, grams or litres. If you’re genuinely looking for the cheapest deal compare these prices rather than the recommended retail price.

Lookout also for products showing the latest expiry dates especially when it comes to perishable foods.

Talk to your Creditors

“Cash is king” and never did an expression mean so much as it does in the current economic climate. Many businesses are hungry for cash and you would be surprised how much someone you might owe money to might discount what you owe them simply to get your cash and put it to use in their business. I recently “settled” a debt of over €5,500 owing by a client to a plant hire operator who did some work for them for €2,500.

Employ Your Kids

Do you have children over 16? If you do, why not consider employing them in your business. You can pay each child

up to €8,250 tax free by using up their own individual Single Persons’ Tax Credit. This might be useful for parents who run their own business and have children at college who help out during the summer months and at Christmas. It’s cheaper than giving them pocket money out of your own pocket (which comes from your own after tax income).

Exercise – It’s Free, Good for You and All the Rage…

Do you really need to take the car on those short journeys? Why not join the many people out exercising nowadays by walking or cycling to work, to the shop, the gym, your friends’ house. It’s free, you’re also doing your bit for the environment, releasing those positive endorphins to keep you ticking over and getting fitter all at the same time.

The Taxman Cometh and the Taxman Taketh Away

Make sure you claim all those Tax Credits you’re entitled to annually. Millions of Euro in Tax Credits go unclaimed each year. Here’s a checklist of the most common –

Maintenance Payments paid to a Former Spouse (if separated)

Employment Expenses (Teachers, Nurses etc)

Deeds of Covenant in favour of persons aged over 65 or incapacitated individuals

Home Carer Credit (Spouse remains at home to mind children, elderly or incapacitated persons)

PAYE Tax Credit

Dependent Relative Tax Credit

Permanent Health/Salary Protection Insurance Premiums

Qualifying Third Level College Fees (Excludes registration and exam fees)

Incapacitated Child Credit

Service Charges (Wheely Bin/Refuse Collection) – Abolished from 01/01/12

Rent Tax Credit (if renting accommodation)

Year of Marriage Review

Donations to Approved Sports Bodies and Charities (Donations over €250 pa)

Health Expenses (Unreimbursed by Health Insurers), including non-routine dental costs,

doctors bills, prescriptions, physiotherapy, MRI scans, orthodontic work etc)

You can claim the Tax Credits each year by submitting a Return of Income form (Form 11 – Self-Employed; Form 12S – Employed Persons and Pensioners) to your local Tax Office. Forms are downloadable from www.revenue.ie

Over 55? Thinking of Retiring?

Property and business values are lower now than they have been for over 5 years. If you are aged over 55 and are thinking of disposing of your business, farm or shares in the family business no Capital Gains Tax will arise if the consideration is less than €750,000. To qualify for the relief you must have held the assets being disposed of for at least 10 years.

It is likely that the Government will reduce this €750,000 threshold over the coming years so now might not be a bad time to consider looking at this.

Grim Reaper

What would happen if you were to die today?

Have you a Will made? Do your dependents know what to do in the event of your untimely and sudden death?

Consider carrying out a review of your financial and legal papers – list where you have kept your policy documents, bank accounts, shares, title deeds to property etc. It never ceases to amaze me the number of people who die whose dependents don’t know where to even start looking for some of these papers – this can prove very costly in additional legal fees, not to mind the delays in getting access to pensions, life policies, bank accounts etc after someone dies.

Get a Second Bank

Are you up to the limit of your sanctioned overdraft or working capital facility? Do you think your business may be left high and dry for working capital if your bank looks at reducing your overdraft limits any further? Consider opening another (non-overdraft) bank account at a different bank. If you reach your overdraft limit with your main bank and you are afraid they will gobble up whatever cash you are lodging why not consider lodging it to the second bank and using it whatever way you need to.

Insure Your Kids…

If you have active kids, particularly those playing a range of sports you might be surprised how difficult it is to make a claim for medical expenses in the event one of them gets seriously injured, loses teeth or requires surgery. The constitution of most sporting clubs prevents members taking an action against them in the event of an injury. One way to combat this is to look at taking out 24 hour pupil cover operated by most primary and secondary schools. For a nominal charge (usually around €8/10 per annum) you can insure your children against the cost of most accidents, including those taking place at home and on the playing field.

Change Your Driving Habits

Have you ever considered how you drive your car? Sudden acceleration, sudden braking, driving in excess of the speed limits are both dangerous – and they cost you money. When driving you should always adopt the motto “easy does it”. Gentle acceleration and braking, staying within the speed limit, making sure your car is serviced when recommended by the manufacturer, correct tyre pressure in your tyres etc – these will all contribute to saving you money.

You should always aim to drive in the highest gear possible at all times. Finally, have you looked in your boot or at your roof-rack? Do you really need to carry around “dead weight” on your car especially on longer journeys?

Shop around for petrol, diesel, tyres, servicing etc. Your loyalty may be costing you money.

Stocks and Shares

Can’t decide between putting your savings into “safe but boring” deposit accounts or investing in a basket of stocks and shares instead? History has shown that since World War 2 stocks and shares have consistently outperformed deposit accounts. While obviously stock markets are subject to much more volatility, risk and market fluctuations than deposit accounts, over a longer time period their returns have proven to be greater. Define the time period of your investment, consider your attitude to risk, get as much advice as you can and invest wisely.

Consider joining an Investment Club and in particular familiarise yourself with the TICN website operated by Owen O’Malley.

Store Credit Schemes

Tempted to buy that new sofa, television or computer advertised before Christmas? If so, don’t buy it using one of the retailers in-house finance schemes. The interest rate you’ll wind up repaying for your purchase will be significant – more even than most standard credit card rates. If you really need to purchase, consider getting an increase in your permitted overdraft limit instead. Keep a very close eye on the APR% rate being quoted before making your purchase.

And finally…

Call it a little bonus if you will. A great source of consumer advice, especially when it comes to people’s money and entitlements, grants, social welfare, tax, medical cards etc is the Government run website – www.citizensinformation.ie. There isn’t a day that goes by that I don’t refer to some piece of information in it. It’s easy to navigate, easy to read and directs you to where you can download application forms needed or other relevant websites. Priceless.

Adrian McKenna

Partner

Moore Stephens Patrick McNamara,

Pamdohlen House, Dooradoyle Road,

Limerick

Tel – Office (061) 229666; Fax (061) 302144; Mobile (087) 8463969

E-Mail – amckenna@msmcnamara.ie

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