As Christmas recedes in the rearview and thoughts turn to New Year’s Eve, it is time to think about getting financially fit for 2023.

On Late Breakfast this morning, financial expert Paul Merriman from AskPaul.ie outlined the best ways to make your money work for you.

He said the biggest mistake most people make is not knowing what it actually costs them to live on a monthly basis.

“People fail to do this all year round, not just on New Years,” he said. “The very basics of that is getting a budget.”

“I think people are afraid when they hear a financial planner talking about a budget, but it’s not about a money diet or restricting your money in any way.

“It’s just about knowing where your money is coming in from and where it is going.

“It’s about knowing what you have at the end of the day, so you don’t go out and spend money that you don’t have.

“I think that’s the biggest mistake people make it comes to spending money – they don’t know how much they actually have to spend because they’re not counting up what it costs them to live on a monthly basis.”

Second account

Paul said he is a “big believer” in having a second account for spending money.

“So, you have one main account and then transfer your own spending money or discretionary money into a separate account,” he said.

“Then you only use that second account when you’re tapping or going out. That’s how much you have then. You know that is how much you have to spend. It’s a really simple thing to do and it is just practical.”

Bills

When it comes to your monthly bills, Paul said it is all about learning to “cut where you can”.

“You have to look at where your bills are going and make sure you’re switching as well to get the best costs that are out there,” he said.

“So it is about giving yourself a little mini audit. Look at where your money is going and, am I getting the best value?

“Maybe a mini challenge for you in January is to take two or three bills a week and see if you can get them cheaper elsewhere or can you renegotiate them down.

“That will automatically give you more money in your bank account.”

Mortgage

Paul said he expects the European Central Bank to raise interest rates to to 3% of 3.5% this year – meaning new mortgages will have rates of around 5.5%.

As a result, he said, anyone who can make larger payments on their mortgage should do so.

“I would be really trying to pay down the mortgage,” he said. “That is different to what I would have said previously.

“On any Instagram Lives I’ve done I would have said never pay your mortgage off early because rates are so low.

“Now rates are increasing you do have to keep an eye on where your money is going. If you can afford to overpay your mortgage you should do it – especially if you are on a five-year fixed rate.

“In five years, you're going to be coming off to a shock so you need to prepare for that by either saving and investing for five years or paying off your mortgage.”

Credit card debt

Paul said the best thing to do when facing credit card debt is to switch providers.

“An Post have a 0% interest rate at the moment, so you can take your whole four grand debt, send it to An Post and they will charge you 0% interest for 12 months.

“So, every payment you make it is going to be going off the capital, you’re not going to be paying any interest. So, you do that straight away.”

He said it is “very important” to rip up the new credit card as soon as it arrives.

“An Post aren’t doing this because they’re sound people,” he said. “They’re doing this because they know the majority of people won’t clear the balance within 12 months

“You have to use this system to your own advantage and make sure you clear the debt within 12 months.”

For more budget advice you can join Paul for his free Instagram Live sessions.