Do you feel like you need to turn over a new financial leaf in the new year? There’s no time like the start of a new year to finally address your money situation, set yourself a budget and save money.
A report from the Debt Advisory Centre shows over 11 million people are still struggling to repay the credit they took out to afford Christmas 2015, with 1 in 5 of those people owing over £1000.
If your financial affairs could do with a new year overhaul, here’s where to start with our tips to help you budget in the new year:
1. Do some number crunching when you budget for the new year
Pick a quiet afternoon and get a few month’s worth of statements out. Find out exactly what goes in, and what comes out. You might be surprised and enlightened (or frightened) about where your money actually goes.
2. Address your new year spending habits
If you decide you are spending too much each month (and most of us will do so) then work out the areas where you can cut back. Perhaps it’s something small but on a regular basis like a frequent coffee shop visit or something larger like a gym or club membership you aren’t really using.
3. Make your savings work harder for you
If you've fallen out of the habit of saving - get back into it. Set yourself some new year budget targets and make sure you make them.
If you manage to make some new year savings with step 2 (above), perhaps you could redirect this money into a savings account.
Make sure you aren’t using an old account paying next to nothing. It’s the newest accounts that tend to pay the highest rates.
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4. Overhaul your debts
If you still have an outstanding mortgage, this is likely to be your biggest outgoing – so make sure you're getting the best deal possible in the new year.
There are 4.3 million mortgage borrowers, representing 39% of the total mortgage market, currently on their lenders' standard variable rate (SVR). This is the rate to which your mortgage automatically reverts when your existing deal expires.
Many people are simply waiting until interest rates rise, at which point everyone will rush to get a new deal. But bagging a new mortgage now could work out far cheaper. Rates are very low at the moment.
If you have unsecured debts, these are likely to be expensive. If you have a balance on a credit card and can’t pay it off, switch to a balance transfer card with a 0% introductory period that will reduce your interest payments – and help you repay the debt quicker.
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5. Get debt help if you need it in the new year
If you feel your finances are beyond simple budget and cost-cutting measures because of hefty debt repayments there are plenty of options.
You can get free advice from a debt charity such as National Debtline (nationaldebtline.org) or Stepchange (stepchange.org) who offer support and help with setting up a solution plan.
This might be a debt management plan or you might even be eligible or debt relief order which writes off debt if you owe under £15,000.
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