Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk
Have you considered your New Year’s resolutions yet? As usual, a lot of us will be vowing to keep in shape, cut down on the booze or trim our waistlines after all the Christmas indulgence. Others will make a career change, cutting down on social media or reading more books a priority. However, it might not just be our minds and bodies that need a re-boot or detox in January – what about our finances?
January is the ideal time to take a long hard look at what we spend, how we spend it and when we spend it – so why not make your New Year’s resolution to become master or mistress of your money?
Use your bank statements to put together an annual breakdown of everything you spent in 2017. Divide your outgoings into essentials and non-essentials – essentials being broadband, gas, electricity, rent, council tax, mobile phone etc and non-essentials being all the fun stuff like meals out, drinks, holidays etc. Talking of holidays, pull the cost for these out so you can treat separately. Obviously, you then need to see where your monthly non-essentials exceed the money you have available for these things as this is how you get into debt or fall back on credit cards.
Talking of credit cards – do you have any nasty lumps outstanding on any that you are paying the minimum off per month? If you are this is an overhead that needs to be seriously looked at because if you’re not shifting the debt you are just paying a huge annual amount for it to sit there. What’s more, on monthly basis the payment is eating into your leisure budget.
If you have debts on several cards one idea is to consolidate onto just one (the one with the lowest interest rate) and most card companies have incentives to do this. When the debt is in one place you can then put in place a strategy to clear the debt completely – by paying an amount over the minimum amount due monthly so you can start clearing the amount borrowed. It’s important to keep to what you can realistically afford but be strict about always making the payment once you commit. This might mean a few months of self-imposed ‘austerity’ but try incentivising yourself with a treat or two when you hit key milestones and when you clear the debt completely.
Meals out, the cinema, trips to the pub and holidays all rack up your expenses. So work back from the monthly total amount you have at your disposal after the essentials have been covered and carve yourself out a monthly amount for entertainment. If you’re overspending on meals out and pub nights look at cutting these down a bit or being creative with your leisure time – why not invite mates around for a few drinks at yours rather than go nightclubbing. Having fun doesn’t have to cost big bucks.
As for holidays, create a holiday fund and put a little aside every month to pay for your annual holiday, so avoiding having to pay out for it in one big lump. Book flights early to get the best discounts or if you aren’t fussed about when you go try really last minute bookings. Also when you’re on holiday stick to a pre-agreed budget and watch those mobile roaming charges!
It’s also smart to put a little aside each month for unforeseen emergencies, you know, the lost mobile phone or new car tyre etc. Even as little as £10 per month soon creates a nice little financial safety net. So here’s to your Happy New Year Finance Detox!
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