Ditch Your Debt in 2019

The new year is a great time to start over with a blank fi­nan­cial slate

No. 1 Magazine - - CONTENTS -

As much as we may be­gin the year with good in­ten­tions, it can be dif­fi­cult if you have any debt or money woes hang­ing over your head. We’ve rounded up our top ex­pert tips to help you press the re­fresh but­ton on your fi­nances this Jan­uary...

BE­FORE YOU TACKLE ANY DEBT, SUSS OUT WHERE IT COMES FROM… Know where you stand

Get your­self or­gan­ised and gather all of your bank state­ments to­gether – in­clud­ing any for credit cards, loans, store cards and your cur­rent ac­count. Next, work out how much you owe on each card and what the monthly re­pay­ments are. Yes, this might be a sober­ing mo­ment but Jan­uary is the month to do it in or­der to give your­self a head start on the up­com­ing year. Next, work out how much in­ter­est you’re pay­ing on each of them so you know the grand to­tal of what you owe.

Don’t tackle ev­ery­thing at once

Sort­ing out money can some­times be a daunt­ing and over­whelm­ing task, which is why it’s im­por­tant to take it step by step. Be­gin by fo­cus­ing on the debt that has the high­est in­ter­est rate as this is what will cost you most in the long run. Once this debt is paid, it will free up cash to get ev­ery­thing else paid off as quickly as pos­si­ble. Next, set up direct deb­its for your re­main­ing debt to en­sure you are pay­ing at least the min­i­mum amount each month and on time.

Christ­mas got the bet­ter of you

Ac­cord­ing to re­search by Na­tion­wide, around 21 per­cent of peo­ple put their Christ­mas presents on a credit card, while nine per­cent rely on their over­draft. Plus, with the av­er­age per­son say­ing they spend half of their De­cem­ber wage on Christ­mas re­lated pur­chases, it is no won­der that a lot of us feel the pinch af­ter the fes­tive pe­riod. How­ever, be­fore you start mak­ing plans to tackle your Christ­mas debts, it’s es­sen­tial to draw up a clear plan to un­der­stand ex­actly what all your fi­nan­cial com­mit­ments are and where you need to bud­get. Steer clear of any pay day loans as these will only add more in­ter­est to your ex­ist­ing debt. In­stead, try a money sav­ing app such as Chip. This will cal­cu­late what you can af­ford to pay off based on your spend­ing habits in your cur­rent ac­count. The app then does all of your sav­ing for you as it au­to­mat­i­cally moves the amount you can af­ford to re­pay into a sep­a­rate Chip sav­ings ac­count.

SIM­PLE STEPS TO HELP MAN­AGE YOUR MONEY Ditch your credit card

Well, as much as pos­si­ble any­way! Car­ry­ing your credit card around with you can be very tempt­ing – es­pe­cially if you are ac­cus­tomed to us­ing a card as your pri­mary source of pay­ment over cash. If you find your willpower crum­bling un­der the pres­sure of that new Zara dress you just have to have, leave your cards at home. In­stead, take out £50, for ex­am­ple, at the be­gin­ning of the month (or just af­ter pay day!) and hide it at the back of your purse. Tell your­self this is solely for emer­gen­cies and then you’re less likely to have any need for your card in the first place.

Set up a cal­en­dar to pay bills on time

Never be late for a bill again! Sim­ply use your phone or a wall cal­en­dar to prompt you to pay them on time. This small re­minder can save you ex­tra pounds, es­pe­cially if any late pay­ments mean a high penalty charge.

Is your li­cence le­gal?

Be­gin 2019 by check­ing all of your per­sonal doc­u­ments. For ex­am­ple, a quick scan of your driv­ing li­cence could pre­vent you from be­ing in £1000 of debt. Ac­cord­ing to the DVLA, more than two mil­lion peo­ple have an out of date photo card or have a wrong ad­dress listed on it. In or­der to check if your li­cence is ready for re­newal, take a look at sec­tion 4B on your driv­ing card which will list the ex­piry date. If it is out of date or any in­for­ma­tion is in­cor­rect, you should head to the DVLA web­site. Re­mem­ber, li­cences need to be up­dated ev­ery 10 years with a new pho­to­graph, and while it is £14 to re­new it on­line, £17 by post or £21.50 at a post of­fice, it’s much cheaper than pay­ing a hefty fine.

THINK AHEAD TO FIX YOUR FI­NANCES... Pre­pare a bud­get

We all see bud­get­ing as ex­tremely bor­ing, but it’s a great place to start to make you aware of what you are ac­tu­ally spend­ing your money on. In or­der to do so, use El­iz­a­beth War­ren, one of TIME’S 100 Most In­flu­en­tial Peo­ple, 50/20/30 tool. This guide­line means that 50 per­cent of your in­come is al­lo­cated to es­sen­tial ex­penses, 20 per­cent to fi­nan­cial goals and the re­main­ing 30 per­cent to life­style and flex­i­ble spend­ing. Al­ter­na­tively, take the ‘no spend day’ chal­lenge. This re­quires you to tell your­self that you can’t spend money one or two days a week, other than bud­geted for things, such as fuel to get to work. Quite of­ten spend­ing money just once can then break the cy­cle for the rest of the day.

Set up a monthly sav­ings plan for next year

Once last year’s Christ­mas spend­ing has been taken care of, look to­wards next year to avoid in­cur­ring new debt. Es­ti­mate your spend­ing for Christ­mas 2019 by re­view­ing what you spent last year. By look­ing at what you roughly spent on the pre­vi­ous Christ­mas, and then di­vid­ing next year’s es­ti­mate by the num­ber of months you have left un­til De­cem­ber, you will get a rough idea of what you need to bud­get for. De­posit those monthly amounts into a high-in­ter­est sav­ings ac­count, and aim not to touch it again un­til Christ­mas comes around. This will dis­cour­age im­pulse spend­ing dur­ing the year. Then all you have to do is stick to your al­lo­cated bud­get when shop­ping for gifts in 2019.

Nick­name your sav­ings ac­counts

In­stead of just hav­ing a sav­ings ac­count that reads ‘Sav­ings Ac­count’ when you log into your bank ac­count, con­sider chang­ing the name to some­thing spe­cific. For ex­am­ple, it could be ‘Hol­i­day 2019’ or ‘New Car Fund’. The more spe­cific you are you’ll be able to visualise how close you are to com­plet­ing your fi­nan­cial goal. Al­ter­na­tively, a sav­ings app such as Monzo will give you real-time no­ti­fi­ca­tions when you spend, some­thing your tra­di­tional bank­ing app won’t. For ex­am­ple, if you bought a £3 cof­fee, you’ll get an in­stant no­ti­fi­ca­tion on your phone, which is a handy way to keep track of your fi­nances on the go.

Try the 30-day rule

If you’re an im­pulse buyer, this tip is for you. The 30-day rule re­quires you to con­sider the value of what you want to buy in or­der to avoid temp­ta­tion. For ex­am­ple, when you go shop­ping rather than telling your­self ‘no’, sim­ply think ‘I’ll buy that later.’ By putting the item back, it will give you time to pon­der over the item (ideally for 30 days) to see if it is some­thing you re­ally need, or if it has mo­men­tar­ily caught your eye. If, af­ter 30 days you’re still think­ing about it, it may be worth the money.

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