With New Year fast approaching talk at the Christmas dinner table will no doubt turn to 2008 and the resolutions we intend to make. Along with the usual ideas about joining the gym and learning a new language you might want to add sorting your finances to the list. Unlike turning yourself into Rocky Balboa or picking up Mandarin, sorting your finances can be done relatively easily with just a couple of hours of thought.
What’s the problem?
If you think you need to tackle your finances then consider why you’ve experienced problems in the past. Is it because you’ve spent beyond your means and racked up a debt? Or are you loosing money because you haven’t taken the time to get the best deals available? Perhaps everything is ticking over well but you need to consider what you could be doing with the extra cash.
Curb debts with a cash injection
If Christmas, or 2007 for that matter, has been an expensive period then you’ll want to curb your outgoings in 2008. Paying off multiple credit cards, loan bills and overdrafts can be a tricky balancing act and many people who find themselves in this situation struggle to keep up on all fronts. If this sounds like a familiar story then it could be worth considering a personal loan. By taking a loan to clear your debts you’ll be left with one monthly repayment.
If you are a homeowner with a good credit record then Firstplus will lend you £10,000 over four years at 6.3% APR, meaning that your monthly repayment will be £236. Even if you’ve had credit problems in the past there are options available – Blemain will offer the same deal with an APR of 11.4% meaning that your monthly repayment will work out at £257.
A world of choice
Many financial services providers rely on you not switching products once the introductory offer has expired before they make any real money out of you. If you’ve been sitting on the same deals for years then a great resolution could be to consider some alternatives.
Credit cards are probably the best place to start, partly because as a nation we have large debts on plastic, according to a recent study twice that of the average Western European, and secondly because there are such a large number to choose from.
Of the 200+ deals available, around ninety per cent of the cards have an option to transfer an existing balance. Many of the most competitive deals available offer an extended period where you will pay zero per cent interest on any balance that you transfer. Virgin Money’s best deal for example lasts 15 months, while Barclaycard’s last 14. In both cases you will have to pay a small fee on the balance, 3% and 2.5% respectively. In each case this works out at £75 and £62.5, which in return for over a year of interest free balance works out well.
Make your money go further
If 2007 has been a very prosperous year then you may need to think about how your cash is working for you. The average current account pays out just 0.1%, meaning that over a year a balance of £10,000 would only grow by £10. This compares pretty unfavourably to the better deals on the market. The Alliance and Leicester Premier Direct Current Account for example pays out 6.5%, meaning that your £10,000 would grow by £650 in just one year.
Be sure to make the most of your ISA allowance this year also. Individual Savings Accounts allow you to save £3,600 in cash and at rates of around 6%. Meaning that if you paid in £3,600 by the end of the year your cash would have grown to £3816.
Get off to the right start
By spending a few hours in early 2008 planning your finances you could find yourself substantially better off by the time it comes to making resolutions for 2009. Stay informed about the products you’re currently using and think about how you might be able to get a better deal.