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It's the time of year again to sort out your finances, especially if you've built up more debt than you're comfortable with in 2008 and want to put that New Year's resolution into action to regain control of your money matters.
This year isn't going to be easy for any of us as we enter the grips of recession, so now is the time to start to plan your finances for the next 12 months and beyond.
Here's the Moneynet's brief step by step guide to getting to grip with your money. However, if you would like a more structured and detailed plan then why not subscribe to our Financial Detox Programme which will guide you step by step and month by month to financial freedom.
- Get all your financial documents together in an expandable file (it will only cost you £2 or £3)- Bank statements, Credit card bills, Gas, Electricity, Water and Council Tax bills. Payslips, Mortgage paperwork etc - it will make sorting things out and keeping on top of your money matters much easier.
- Sit down and write a list of all the money you owe (credit cards, store cards, loans, overdraft, friends/family etc)- This is the hardest bit. Many of us know we have money problems but are not prepared to own up to them. If you're not prepared to face this first step, it's unlikely that you'll manage to get your finances on track.
- Draw up a list of your monthly expenditure(excluding debt repayments) and make sure you make a monthly allowance for annual expenses such as car tax, Christmas and birthday presents and holidays, rather than having to pay for them out of one month's salary. This is often where problems start!
- Subtract the total monthly expenditure from your monthly income to show how much you can afford each month to repay your debts.
- Apply for a personal loan and/or a 0% credit card balance transfer (if you have a good credit history) and start paying off the amount you owe.Virgin Money is offering 0% for 16 months and Alliance and Leicester 0% for 12 months. For personal loans, check out Lombard Direct from 8.3% APR and Alliance and Leicester from 8.7% APR.
- Be realistic about the amount of debt you can pay off – if you make it too painful for yourself and don't leave yourself with any spending money, you'll soon give up!
- IMPORTANT - If you are repaying existing credit card debts, ensure you destroy the cards and close the accounts otherwise if you keep the cards in your purse or wallet you may be tempted to use them in a moment of weakness.
If you find that your financial problems are more severe, then you should seek free confidential advice from your local Citizens Advice Bureau or telephone the National Debt line on 0808 808 4000
Credit Card Balance Transfer Deals
If you have built some debt on credit cards and store cards and you are paying interest rates of 20% plus, you could be paying a great deal less. 0% balance transfer deals can work well if you've got expensive debt to switch over. The best thing to do, once you've transferred your balances, is to leave the new card at home somewhere safe to stop you being tempted to use it for purchases and finding yourself back to square one.
As with all free deals there are some minor drawbacks to be aware of: Look out for the balance transfer fees. For the longer term 0% deals these can be up to 3.5% of the balance.
Take control of the debt: it won't just disappear. Use the 0% period to try and pay as much off as you can, not just the minimum monthly repayment.
Personal loans
If you are paying high rates of interest on numerous credit cards and store cards and want to pay them off and be left with a more manageable single monthly repayment, then an unsecured personal loan could be the best route for you. The advantage of a personal loan is that you have an agreed interest rate and monthly repayment, both of which are fixed for the full duration of your loan agreement.
If you do look into the possibility of taking out an unsecured loan, keep an eye out for the loan provider pushing you into buying expensive insurance to go with it. If you want some cover to protect your loan, you can find cheaper payment protection insurance through independent providers such as British Insurance.
Shopping
It's not the most interesting thing you'll ever do, but try drawing up a list of the meals for the next 7 days and making your shopping list from this.
Then visit the supermarket just once each week (rather than the expensive corner shop 3-4 times per week), but before you go, check the contents of your kitchen cupboards and freezer – you'll always find a couple of meals in there. Otherwise your freezer just becomes a glorified store cupboard and things get buried away at the bottom. By the time you find them they've perished and you have to throw them away.
We tried this shopping experiment out on five families in 2008 and they each saved between £10 and £30 per week – not bad when you add it up over the course of a year.
We hope this brief step by step guide will help you on the way to sorting out your money matters in 2009, however If you'd like details of a more in depth and structured approach from our experts to help you gain control of your finances once and for all, click here.
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