Ditch Your Debt in 2019
The new year is a great time to start over with a blank financial slate
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.