Articles > New Year, New Finances

With 2006 now upon us, many people are breathing a sigh of relieve that the expensive holiday period is over, whilst nervously awaiting that dreaded credit card bill for all the extravagances that go with this period to drop through the letterbox.

Now is the ideal time to take stock of your financial situation, and to put in to practice a few things that will save you money and improve your finances as a whole. You may be thinking ‘now isn’t the time to review my money situation, I don’t have any to review..’ Actually that is why now is a good time – when money is tight the incentive to improve things is there and it makes controlling your spending much easier too.

It takes the average person three months to clear the debts that they racked up over Christmas, or to put it in other words they will spend a quarter of a year in debt. Sounds like a long time, right? When you consider that the lender will be charging interest on that money for that period of time, you can see that it is a good way to throw money away. Then of course, once the debts have been repaid, Christmas is only around the corner again, and so the cycle continues. There are other ways though….

The first thing to do is to realise that those outstanding credit and store card balances are costing you a significant amount of interest, that should help you to realise that clearing them needs to be a priority. If your card debts are particularly large, and are likely to take you longer than a couple of months to repay then you should seriously consider a debt consolidation loan, which can replace them at a lower interest rate. Make a plan for how much you are going to pay off each month, make sure that it is realistic for you to meet, and also that it is high enough to pay off the debts quickly.

Money for nothing. You may think that there is no such thing, well actually there can be. For one if you have a mortgage then take a look around and see what other mortgage providers are offering, you may be surprised at how much less you could be paying in interest simply by switching. Even if you don’t have a mortgage, there is still a very common form of money for nothing – that is you paying good money in return for nothing. There are literally thousands of people who are paying out each any every month for gym memberships, movie rental fees, club memberships and other such fees for things that they never use. If you are one of these people then cancel that membership, its better that the money stays in your pocket rather than sending off to something that seemed like a good idea when you started it.

Once you have ridden yourself of your debts, opening a savings account is a very good idea. Do some shopping around and find one that offers a high rate of interest and if you want instant access then make sure that it has that. You should be able to find an account offering between 4 – 4.5% without much trouble, compare that with the typical rate of 0.1% on typically current accounts and you can see that money in a savings accounts will work much harder for you. Of course, simply opening the account isn’t going to do you much good – you need to make sure that you put money into it each month and don’t be tempted to dip into the savings unless you really need to. It is recommended that you have the equivalent of at least three month’s worth of earnings set aside, as this is the average time taken to find a new job.

Making the most of your money requires you to spend a little time thinking about what it is that you are going to do with it, there’s little point in trying to build up your savings whilst having large credit card debts as the interest paid will be greatly outweighed by that charged, so focus on clearing the debt. Similarly you are throwing money away if you are keeping your cash reserves in your current account – move it to a savings account and earn some proper interest on it instead. Taking the time to assess your financial standings now will put you in much better stead for the coming year.