Isn't it high time we introduced an annual
head-out-of-the-sand day, to plan our finances?
So, having agreed on the need for an annual hot date of
reckoning, when the big day comes what should you do? Apply these
top 10 tips to transform your situation:
1. Take stock of your finances
You need to understand what is going on. People with money
problems share one trait, they are unaware of the true amount they
owe; many cannot even come up with a 'ball park' sum!
Payplan, the free debt solutions company that works with
Citizens Advice Bureaux and National Debtline, recognises that the
most critical step towards solvency is daring to look.
Sit down with a pen and paper and work out how much you owe.
Take account of all financial liabilities including deferred
payments. Next, list your regular outgoings, including your
mortgage, direct debits, loan repayments, hire purchase instalments
and other routine sums.
Then list your incomings including wages, pensions, tax credits
and interest on savings and investments. This will give you a good
idea of your overall situation.
2. Draw up a budget
It is essential to consider your income and expenditure and
apportion amounts for each section. Your budget is the road map for
your finances and allows you to track progress.
You can tweak it as you go along but the golden rule is that
over-expenditure in one area means cutting back in another.
3. Prioritise your debts
List your debts in terms of the interest rates that apply, with
the highest at the top. Typically the cards that incur the higher
rates of interest are store cards and, if you can face looking into
it, you will soon discover the truth behind the mathematics of
Bargains + interest = extravagances. (Don't beat yourself up,
learn from it.) After meeting your mortgage you need to make paying
off this sum your priority.
4. Consider a surge in credit card repayments.
By making minimum payments it will take a very long time to
clear the debt. If you have any surplus income you should 'up' the
payments to pay it off. It is worth cutting back drastically on
your lifestyle, in the short term, to achieve this.
5. Consolidate with caution
Should you consolidate your debts with one large loan? This can
be a very cost effective move but you have to be extremely cautious
Research shows that a high percentage of people who clear their
debts with a consolidation loan, soon return to racking up debt on
their credit cards, compounding their financial problems. If you
consolidate your loans you need to disregard or cut up your credit
6. Check your mortgage
One of the most effective ways of potentially reducing outgoings
is via your mortgage. Lenders compete aggressively for your
business, so make sure you have the best possible deal.
In your search for a better rate you need to consider the total
costs. An agent might well find a fabulously low rate but with a
hefty set-up cost.
You need to consult a whole of market broker with no arrangement
fee, such as www.whoslending.co.uk
7. Massage your credit rating
Bound up with your mortgage is your credit rating. Improving
your credit rating can open the door to a loan at a lower rate of
You can do this by checking that you are on the electoral
register and, if you are, that your details are up to date (visit
www.aboutmyvote.co.uk for further details).
Make sure that you are not linked to anyone from your past with
a poor record of repayments as this will prejudice your
application. When you approach lenders for loans make sure that
they initially give you a quotation rather than conduct a full
This is because you will be marked down for multiple searches as
lenders fear you are overstretched.
8. Court your lenders
Lenders like pro-active customers who communicate with them and
are often willing to adjust their terms.
If blips in your borrowing record can be easily explained (such
as unexpected redundancy) do not hesitate to talk to your lender
and reassure them about your new job.
9. Anticipate cash flow problems
If you foresee cash flow problems on the horizon you need to
discuss the options as soon as possible. It is likely that a lender
can recommend a solution, for example extending the term of your
mortgage or switching products.
You may need to sell a car, forgo a holiday or let out a room.
Your bargaining position is much stronger whilst you are still
solvent. Seek advice from a CAB recommended debt solution company
such as Payplan, who offer their services for free.
10. Feel uncomfortable about debt
Do not fall into the trap of thinking that debt is normal. It is
entrapping and debilitating and you need to think in terms of
getting rid of it as soon as possible.
The loans that buy your house and car (transport to work) are
usually the only wise ones. It is rarely a good idea to extend your
mortgage to finance the frivolities of everyday living.
For further information please see the
Step Change Debt Charity website.