The comments came in response to protection insurance company Bright Grey’s advice to improve your financial ‘safety net’ in 2012. Are you saving at the moment? Could you be saving more? Think Money believes looking back at your finances from one year ago is an excellent way to identify whether your financial situation has improved – or worsened.

If your finances are in a worse shape than a year ago, you need to identify why before you can begin addressing the problem. Money problems ‘don’t usually come out of the blue’ – it’s likely there are some underlying issues with money that need to be addressed.

Looking back to twelve months ago, you may be able to identify the financial habits you had back then that helped you do well financially, as well as any ‘toxic’ habits that need banishing.

Think Money offered this additional advice to anyone with debts: “If you were managing your debts successfully a year ago, but feel you’ve lost control now, what were you doing differently then? Did you have fewer debts of smaller amounts, a higher disposable income, or were you simply more financially organised? If you’re facing debt problems, it’s important to get professional advice as early as possible, so you can find an approach to budgeting and debt management that works for you.”

Reviewing your spending regularly is an important part of debt management, as it could be that you’re overspending in areas where you could cut back, or it could help you identify other areas for improvement.

Article Courtesy of Think Money

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Of course, this isn’t Sir Richard or Virgin’s first venture into the murky world of finance. Virgin already offers a popular and successful managed fund as well as personal finance products such as credit cards. However, there are only 200,000 of those Virgin credit cards in circulation; a mere drop in the ocean when it comes to the UK-wide banking industry.

Even though Branson is undoubtedly an excellent businessman, with more successes than failures behind him, that does not mean that the Virgin brand cannot fail. More established names than Virgin have attempted to branch out into new markets in the past only to find that they are unable to penetrate whatever industry they have set their sights on.

Virgin has already recorded a number of misses in the personal finance sector; hardly inspiring confidence in Branson’s efforts to take on the major banks. The Virgin Index Tracker fund was launched with a huge fanfare, charging just 1% in an industry where fees of 5% were considered good value for money.

Unfortunately, those who rushed to take advantage of the deal have seen little to cheer about besides the low charges, with the Index Tracker remaining stubbornly at 160% while the FTSE All Share Index has risen to 220%.  Market experts, as well as those with a vested interest in Northern Rock, the shareholders and investors, are concerned that banking is just the latest in a long line of new obsessions for Sir Richard and that his heart is not really in the venture.

The business only cost him £747 million, compared to the £1.4 billion that the UK taxpayers had to shell out to save Northern Rock, which means that Branson can afford to play around with his new toy without being too concerned about making losses or profits.

The old Northern Rock branches have already been given a Virgin-style makeover, complete with the ubiquitous flashy red colour scheme. Experts are predicting that the “new” bank will enjoy some success, at least in the short-term, with Branson expected to draw on all his skills as a marketer in promoting the new products and accounts.

Cash incentives for opening new accounts have already proven popular at other financial institutions, such as the Co-Operative and Santander, and this is likely to be one of the tools that Virgin employs to win customers from the High Street banks.

The worry is that Branson is not planning to stay around for the long-haul; a previous foray into the financial services sector ended with a sale to Royal Bank of Scotland. This means that customers who think they are signing up for something different when they open a Virgin account could end up with just the same old bank after all.

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The Post Office estimates that the average person will spend an extra £200 in January and people will be using credit cards to purchase everyday items. This is only a 2% rise on January 2011 but it is a signal about the state of people’s incomes and the increasing cost of essential purchases.

The head of credit cards for the Post Office is Az Alibhai who has commented, “Many people have debt spread over several credit cards and it can be a good idea to bring the debt together so that they can reduce interest payments and make everything a bit easier to handle. It is very important that people don’t let their debts get out of control and by using the right credit card this is something that can be avoided.”

A 0% credit card can be a good option if you are buying everyday purchases on your credit card. These cards mean there is a long period where you won’t have to pay interest on anything you buy. Currently, most credit cards of this nature are offering around 12 months as the standard interest-free period.

While there are a lot of cards that claim to have no interest it is important to remember that there will probably be fees associated with the card which are generally somewhere around the 3% mark.

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A recent campaign has been launched by charities advising on debt and is targeted towards young people, encouraging them to seek help with their debts early on. It is hoped that the campaign will help young people avoid the financial difficulties associated with payday loans, which offer a small amount of money for a very high interest in the short term.

Money Advice Trust is headed by Joanna Elson who has said, “The picture of young people today is much bleaker than it was for their parent’s generation, in the past those aged 25 and up were buying homes and saving for a pension, but with the economic climate today this is something that is simply not possible and many of these people are instead suffering from debt. This means that they remain trapped in the rental market and are unable to find their way onto the property ladder.

“In the past people are borrowing money and they could reasonably expect that their incomes would go up but today this is something that is no longer guaranteed and many people are finding that even if they borrowed money responsibly they are now unable to pay it back.

Furthermore, young people are being faced with a higher cost of living as the price of food, energy, and transport is all increasing. All of this combined means people are simply unable to afford the repayments on their debts.” Since 2009 nearly 50,000 Debt Relief Orders have been issued in the UK.

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The amount of real income that the population has is at its lowest point since the early 1980s and this is having a significant effect on the amount people are spending in shops. There are price wars taking place on the high street and the Internet encouraging people to spend more money. Retailers are very concerned that much of the stock is going to be left over as people stop spending money, this has led to significant pre-Christmas sales taking place.

Despite the return of inflation rates to normal levels it is expected that the price of goods in 2012 will still rise ahead of the amount people are earning. However, throughout the year it is expected that the gap between the two figures should become much smaller. It is expected that by 2013 inflation-adjusted wages should begin to rise.

Many analysts have said that they suspect that the increased inflation has been one of the main reasons why economic activity has slowed down in the past year and a half. The reason for increased inflation has been largely because of the increasing VAT increase that took place in January and more expensive energy bills. These factors are said to significantly outweigh the Eurozone crisis in what is causing the U.K.’s economic problems.

The type of inflation that has been occurring recently has not benefited the population. Normally, when inflation figures are high, people see the value of their house increase which means the value of the debt is less. However, house prices have not risen so people’s debts are just getting larger.

In fact, recent figures released by the government have shown that house prices have fallen since last September. House price values have fallen by an average of nearly 1.5% compared with last year and if you account for the cost of living during the same period the fall is actually significantly larger at 6.6%.

All of this means that consumers have less disposable income and they are tending to focus on paying off their debts rather than increasing them. This has meant that retailers have suffered significantly and their problems have been compounded by the Eurozone crisis. It is expected that even with inflation falling the demand is going to remain weak for quite a while to come. In the next few months it is expected that inflation is going to come down significantly, but whether than actually happens remains to be seen.

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There are only a few weeks until Christmas and this means it is probably too late to start up a regular payment plan or to start building your savings. However, these are not the only ways to get some extra money around Christmas time.

Saving money is a great way to have more to spend at Christmas. Cutting back on non-essential items such as expensive takeaway coffees and store bought lunches will save you several pounds by the time you get to Christmas. You’d be surprised how easily this sort of saving adds up and how quickly you will find you have put away a good amount of money.

Some people are going to have to rely on credit to buy gifts this year and if you have to do this then be very careful about the sort of credit you attain. Using an overdraft can be a good idea but if it’s unauthorised then you have to pay a lot of interest and the bank can demand that you repay it at any moment.

Personal loans are another way to borrow but you won’t get favourable interest rates unless you take out a large sum of money. Even the best rate loan from the Post Office will still mean that if you borrow around £2000 then you will have paid around £150 in interest by the end of the repayment period.

Credit cards can be a very useful tool if you use them properly but if you do not clear your debt on time you could end up having to pay credit card debt for many years to come. There are cards that offer interest-free periods and if you are careful to pay off any money you borrow before this time ends they can be a good way to borrow money at no cost.

If you have a lot of gifts to buy then taking advantage two-for-one offers the great option. Around Christmas time Marks & Spencer and Boots have good offers. It is also worth checking supermarkets for special deals on gift items.

Planning is also essential to saving money and doing this with regard to food is a good way to reduce the amount of money spent. An average household in the UK throws away over £480 of food a year. If you make efforts to reduce this they will spend less on food every week.

Planning meals ahead of time is easy, all you have to do is make a list of what you are going to eat for the week and plan your shopping list around that. You can also make short-term savings by checking to see what you have in storage and eating that first.

Many people have reward cards to numerous stores so if you are feeling a little strapped for cash check out how many points you have on each one and shop at those stores and don’t use any cash into you have exhausted the points. If you need to make some money last-minute try selling some of your possessions that you don’t want any more, there are numerous websites where you can make a listing.

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The government has announced that it will be having a summit with the leading energy providers, which will be attended by the energy secretary and the Prime Minister. The topic of the summit has been announced as, “Helping people to afford energy for the winter.” If you want to reduce your energy bill there are several steps you can take.

TheEnergyShop.com is a website that compares providers. The website has said that last year the average customer who swapped saved over £300. Shopping around for an energy provider can be a good way to save money. Citizens Advice have also said that switching to a payment by direct debit can save consumers around 10%.

If you do switch to direct debit make sure that you are not getting over charged. Check that your bills match with the amount leaving your account, often if you overpay your account will go into credit. There is little point having this money sit with the energy company so be sure that they take it off your next bill.

You can find a guide for paying by direct debit with Ofgem. British Gas, npower and Scottish Power are the energy companies that are known for offering the best savings for those who choose to pay by direct debit.

Making improvements to your home is a great way to save energy. Insulation is a very important part of this and the government has a scheme which offers free insulation to suitable homes. This can reduce your bill by over £100 per year. There are various other improvements you can make your home, such as installing double glazing, draught proofing windows or upgrading your boiler. These will be costly in the short term but over the long term they are sure to save you money.

There are some schemes that offer money off for low income groups. Pensioners who have a small income are entitled to receiving over £100 off their fuel bills in the winter months. Be prepared though, as this is something you need to apply for in advance. Checking the meter is also an important way to avoid being overcharged.

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The head of tax at ACCA, Chas Roy-Chowdhury, says that any money that students earned through part time or summer jobs isn’t likely to take them over the personal tax limit. He urged students to check payslips and ensure that they haven’t paid any tax they didn’t have to, and if they find they have, to claim it back straight away and not wait until April, the end of the tax year.

The personal tax allowance for the year 2011/12 is £7,475. Anyone who earned under this amount in the single tax year April to April isn’t eligible to pay any income tax. This tax should only be paid on earnings which have exceeded the personal allowance.To make things easier for businesses, tax is usually taken out of pay packets automatically, even if it shouldn’t be,’ says Chas Roy-Chowdhury.

Students should work out what they earned during the summer or what they expect to earn over the coming months. If this figure comes under the threshold and students see from their payslips that they have been paying or are paying income tax, they should get in touch with their nearest tax

However, while you can claim back overpaid income tax, there’s nothing you can do about National Insurance Contributions. With few exceptions, everyone in work has to pay these.HMRC can be contacted about overpaid tax on 0845 300 0627.

Those claiming overpaid tax should have their National Insurance number to hand. Those still working should get a rebate in their next pay packet, while those no longer working can expect a cheque. You can also find out more information on overpaid tax on HMRC’s website, here:  http://www.hmrc.gov.uk/incometax/overpaid-thro-job.htm#1

‘To avoid future problems during holiday times, whether at Christmas or Easter or next summer, students can fill out a P38S form,’ continues Chas Roy-Chowdhury. ‘This stops tax from being automatically taken out of your pay packet during holidays and saves you from the hassle of tracking down your rebates.‘University can be a worthwhile but expensive experience. If you’re owed money, there’s no point waiting for HMRC to give it back to you; you need to get on the case.’

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The report states that the measures have to be in place by 2019 at the latest, and Chancellor George Osborne has welcomed the proposals. The aim of the new proposals is to increase both the transparency and the competition in the sector involving personal current accounts where, at present, the 4 largest banks have a 77% stranglehold. It’s believed that the competition is suffering due to the difficulties involved in switching.

The report is therefore recommending that this process be made much simpler for consumers with the introduction of the free ‘current account redirection service’. This will include having a time limit of 7 days for a transfer to be completed by and that all payments and direct debits will be redirected automatically to the new account.

The report has therefore recommended making it simpler for consumers to switch bank accounts by introducing a free current account redirection service. This would include setting a time limit of seven working days for transferring an account and making sure that all direct debits and payments are automatically redirected to the customer’s new account.

The head of banking for Moneysupermarket.com, Kevin Mountford, has said that after the financial meltdown, the way that the industry has consolidated greatly reduced the options available for UK customers, so any measures that encouraged consumers to switch their current accounts quickly and easily were very welcome.

The report does not include, however, something that has been bandied around for quite a while, and that is the introduction of portable account numbers, which allows a customer to keep the same details should they change banks, just as you do with mobile phone providers. This option has been ruled out for the time being due to the costs, but it may reappear again sometime in the future.

The major question being asked is if there will be any downsides or penalties for bank customers. One possibility is that customers may start to be charged to use their basic current account services, so the bank can give their now segregated retail banking arm a boost. The numbers of free current accounts are already declining rapidly, any many analysts feel they will soon only be available to tempt new customers.

Current accounts classed as Premier accounts from Lloyds TSB and Barclays currently cost £300, and USwitch believe that this report will boost this trend and banks will be focussing more on their high end customers. While this might be good news for the wealthiest customers with these premier accounts, it doesn’t look as if the ordinary man on the street is going to be smiling when he finds himself paying for a basic service that has always been free.

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