As we near the end of January, people are getting their first pay packets and are seeing for the first time what the recent budget changes will mean for them. This article from Emma Kennedy, Sunday Business post, tells you to get creative with less cash!
By the end of this week, most of us will see the full extent of how Budget 2011 will affect us in black and white. December’s austerity budget announced €6 billion in spending cuts and tax measures, including a 4 per cent cut in social welfare payments, except pensions.

With the tax changes effective since January 1, people who are paid monthly will see just how much their wages have shrunk when they receive their January pay-packet this week.

Tax credits were reduced by about 10 per cent, taking the single person’s tax credit from€1,830 to €1,650.For a married couple, their personal tax credit is now €3,300, down from €3,660.

The tax rate bands have also been narrowed, meaning you now pay tax at 20 per cent on a smaller proportion of your income and consequently pay more tax at the marginal rate of 41 per cent. For a single person, the standard rate threshold was €36,400.Now it’s €32,800.

For a married couple with two incomes, the higher rate of tax now kicks in on income above €65,600. Previously, the threshold was €72,800.

The new universal social charge, which replaces the income levy and the health contribution, applies at 7 per cent on income of slightly over €16,000. Add to this the abolition of the PRSI ceiling, and most taxpayers will see a significant drop in their take-home pay.

With that in mind, and with the prospect of more harsh budgets ahead, it’s important to get your financial house in order to ensure each euro you earn goes as far as it can.

The financial habits we adopted in the boom days need to be changed, replaced with habits more suited to the current climate.

Make holding onto your cash, or at least as much of it as possible, your main objective for 2011. But before you can make changes to how you manage your money, you need to recognise your financial personality type.

The ditherer

Do you worry endlessly about your finances, but yet never get around to sorting them out? If you are worried about the financial position you are in, you must address the problems, as they won’t go away on their own.

Sticking your head in the sand and putting off important financial decisions only serves to give control of your finances to someone else.

For example, not engaging with your lender in relation to personal debt or mortgage arrears means that the ball is in their court. However, taking a proactive approach gives you more options.

Turn to p2 for The Money Doctor’s guide to getting your financial house in order and tackling your debts

The inert consumer

Do you grumble about your bank, your insurer or your mobile phone company, but continue to avail of their service? If you find that you are not getting value for money and good service, put your money where your mouth is and move.

Switching provider is easier than it seems, and there are statutory provisions in place to help you. For example, if you pay hefty transaction fees on your current account, look around at the other options.

Under the terms of the Central Bank’s code of conduct on current account switching, your bank is obliged to make the process easy for you.

If you suffer from consumer inertia, make 2011 the year that you actually shop around, rather than just intending to do it. Turn to p3 for tips on what to consider when switching provider for a variety of financial products

The impulse buyer

Do you take €50 out of the ATM and then scratch your head wondering where it went? If you are not in control of your spending, you need to become more disciplined if you want to meet your financial goals.

Taxis, takeaways, your morning coffee, a glossy magazine, expensive gizmos, underutilised gym memberships – the list of unnecessary spending goes on. If you can afford these items, great. But in most cases, these discretionary spending nasties can eat into already strained budgets.

Before you make a purchase, think about it. Keeptrack of what you spend, and realise that your spending has an opportunity cost.

Buying a coffee a day on your way to work, for example, means you are spending about €15 a week.

Don’t just let this money waltz out of your wallet. Instead, regain control of your finances by making an active consumer decision on whether you really need, or want, to make this purchase.

The saver

Are you saving and feel mildly smug that you are completely in control of your financial destiny?

Think again. Saving is about more than putting money aside each month. Firstly, are you getting the best interest rate on your savings, and are you aware of the rate your savings are earning?

Also, if you have debts, saving might not make sense. You need to compare the relative costs of each option. For example, leaving a few hundred euro in a demand deposit account at a miniscule interest rate makes no sense if you have an outstanding credit card balance that you are paying exorbitant interest on.

Saving is great, but make sure you save smarter to get the maximum benefit from your efforts.