Five Mistakes To Avoid In 2009

Now's the time for New Year's resolutions and promises to be good. So, here are five mistakes you should resolve to steer clear of in 2009.

This article was originally sent to Fools as an email in our 'Afternoon' series.

At this time of year, the words of that great wit and playwright Oscar Wilde come to mind:

"I can resist everything except temptation."

"The only way to get rid of a temptation is to yield to it."

I'm with Oscar on this one, as I am terribly weak-willed when it comes to impulse control. Indeed, for the first time in decades, I decided not to make any New Year's resolutions this month. Alas, recent history has demonstrated all too well my inability to keep my year-end promises!

Then again, although I appear unable (or unwilling) to give up smoking, I am pretty good at avoiding bad financial habits. This stems from the fact that I strongly dislike paying too much for anything, no matter how small. In fact, I would rather walk away empty-handed than pay over the odds for anything. So, rather than offer words of encouragement and advice for the year ahead, I'm going to point out five expensive pitfalls to avoid:

1. Don't allow your savings to stagnate

Last year saw the Bank of England slash its base rate to an all-time low of 2% a year. Thus, in this environment of ultra-low interest rates, rising prices will eat away at the future value of your cash pot. Hence, it is vital that you don't allow your savings to shrink inside an inferior savings account. It is still possible to earn 5% a year before tax (via the ING Direct Savings Account) and yet have instant access to your life savings, emergency fund or nest egg. So, please check your savings rate and be prepared to switch accounts at the drop of a hat!

2. Don't automatically renew your insurance policies

Many of us casually allow our insurance policies to renew without first subjecting them to thorough price-checking. This is a big mistake, because insurers have a habit of hiking premiums for existing policyholders. So, do me one favour this year: be sure to shop around for car, home (buildings and contents), travel, life and other insurance policies. Otherwise, you could be throwing away hundreds -- even thousands -- of pounds in 2009 and beyond.

3. Don't ignore expensive debt

Although the base rate is at its lowest since 1694, the same can't be said for the interest rates charged by credit cards, store cards and overdrafts. In fact, a typical credit card charges a yearly rate of around 17.3% APR, which is nearly nine times the base rate! For store cards and for cash withdrawals using credit cards, interest rates can exceed 30% APR.

Likewise, unapproved overdrafts are fiendishly expensive, even if you overlook the rip-off fines which they levy. So, if you have any interest-bearing debt on a credit or store card, try transferring it to a table-topping 0% balance transfer card. For a one-off transfer fee of, say, 3% of your balance, you can stop the clock on your interest bill for up to sixteen months.

4. Don't overlook your pension

According to a recent survey from the Halifax, more than half of all workers (52%) don't pay into a pension. Alas, without some kind of retirement savings, these people can look forward to a penny-pinching retirement on the £4,700-a-year basic state pension. However, thanks to tax relief (plus contributions from a generous employer, if you have one), your pension contributions could be lower than you think. For more information, read Join Your Company Pension Scheme Today.

5. Don't forget your tax return

Finally, an important deadline looms at the end of this month. The last day for submission of self-assessment tax returns (the dreaded SA100 form) is 31 January. If you don't get your return to HM Revenue & Customs and pay any tax due by this date, then you'll automatically be fined £100. Further penalties rack up the longer you delay, so put this in your diary today!

More: Search for superior savings accounts | Banks Hold January Sales Too | Super Savings Accounts For 2009