Hidden treasures in the money maze

Go on, be honest. Like most of us out there your New Year's resolutions probably collapsed within 36 hours of the clock striking midnight. But that needn't mean you have to stay stuck in the labyrinth for ever. Nic Cicutti offers a way out.

Insurance companies, mortgage lenders, fund managers and high street banks are all different animals. Yet they have one thing in common. They thrive on our inertia.

They know we have good intentions, that we hate being ripped off, that we can spot a bad deal if we really try. But finding our way out of the thickets can be so time-consuming it sometimes feels easier to stay rooted where we are - and that is how the money men become rich.

The important thing to remind yourself is that the steps you take to improve your finances in 1998 are emphatically not part of a new year's resolution package. Rather, they each involve a series of simple, even if occasionally time-consuming steps. Once you have sorted out one problem, you can move to the next one. Before you know it, you will be many pounds better off.

Take the first problem: Christmas overspend syndrome. The chances are you are hundreds of pounds, perhaps even pounds 1,000 in the red on your credit card. Sticking with your traditional issuer means paying the bill off in, say, four stages of pounds 250-odd each month. By the end, you will probably have paid up to pounds 42 interest to your card issuer.

On the other hand, switching the debt to Capital One Bank, which has a one-year offer of 6.9 per cent APR, means repaying the same debt would incur interest of just pounds 15 or so. So that's pounds 25 saved.

Then there is your bank account. For the past 457 years you have been loyal to the high street bank which gave you your first cheque book. The fact is, it pays interest of just 0.5 per cent if you have pounds 1,000 with it. More likely, when you are overdrawn with say, Lloyds, you pay 1.45 per cent a month, plus a further pounds 8, if you are more than a tenner overdrawn.

Again, the solution is simple: Schroders offers a cheque book and 6.4 per cent gross on minimum balances of pounds 1,000. If you are an overdraft merchant, Alliance & Leicester, while not so generous in the interest stakes, charges only 0.76 per cent and no additional monthly fee. In nearly every case, banks and building societies will fall over themselves to help you transfer your standing orders and direct debits to a new account with them. Try them and see.

So, you are probably pounds 60 to pounds 70 better off already. Funny how the walls on that maze already look smaller. Fancy another go?

Let's take your savings. You have paid off your debts and are now putting money away for a rainy day. You need quick access to it, so shares and suchlike are not high on the list. Alliance & Leicester, so nice when it came to overdrafts, is paying you 4.6 per cent gross on that pounds 1,500 you have tucked away. That is pounds 69 a year before tax. The thing is, Woolwich is paying 7 per cent gross on its Cardsaver account. That is pounds 105 a year before tax, or pounds 36 more.

Plus, you are married. One of you is on higher rate tax, the other is on 23 per cent, or may not be working. Have you filled in a form to have interest paid gross? For a non-taxpayer, that works out at pounds 20 more interest for every pounds 100 paid gross. For higher rate-taxpayers, having an account in your lower-rated spouse's name saves you pounds 17.

You're on a roll. Take the mortgage next. For the past three years, you have been on the Halifax's variable rate, currently 8.7 per cent. On pounds 50,000 loan, that means payments of pounds 330 a month. A two-year fix, presently available from FirstMortgage, is pegged at 4.7 per cent. That is about pounds 180 a month for two years, reverting thereafter to a variable rate which is presently 0.5 per cent cheaper than the Halifax. So even after two years, you will save almost pounds 20 a month.

Then there is your home and contents insurance. Premium Search, a telephone broker based in Northampton, offers to undercut the cheapest annual quote for combined cover by pounds 50. Easy.

We're really motoring now. Which brings us to car insurance. Last year, inertia meant you stayed with the same insurer. Go on, make a few calls. The chances are you'll save another pounds 50 or so.

By this stage, the hedges on that maze are really small. So small you can step over them with ease. You are many hundreds of pounds a year better off, to the point where you can begin to set aside money for the long term. That means equities, which experts assure us have out-performed deposit accounts over longer periods. But where to turn?

Things are now a little more complicated. There are scores of financial products, all of them slightly different from each other. Which is right for you?

At this stage, swallow your pride. You need to talk to a good independent financial adviser. They are not difficult to find. One call will give you a list of three in your area. You may need a few tips on how to pick one. But that comes later. Meantime, get cracking on these ideas. And watch the pounds rolling in while the maze shrinks.

Premium Search 0800 109876; Capital One 0800 669000; Alliance & Leicester Alliance account 0500 959595; Woolwich 0800 222200; FirstMortgage 0800 080088; Schroders 0171 6583301; for a financial adviser near you, call IFA Promotion 0117 971 1177.

`The Independent' has published a free `Guide to Making Your Investments Work for You'. The guide, by Steve Lodge, personal finance editor on the `Independent on Sunday', is sponsored by Wesleyan Financial Services. It is available by calling 0800 137 9749. Or fill in the coupon on page four.