1. Find out what you owe
Before you can make any plans, you need to know how much money you owe – and for what. The simple place to start is your credit report, which lists your credit accounts, from loans, cards and mortgages to utilities, mobile phone contracts and catalogue accounts. As well as your repayment history and the amounts you owe, it details applications for new credit accounts, court judgments, IVAs or bankruptcies and other information that lenders use when calculating your credit rating. There’s also a useful list of your lenders, which can act as a quick reminder of accounts you might forget
2. Make a list
It’s always easier to get organised when you can see at a glance where you stand. Try making a list of regular outgoings, using your credit report as a guide and cross-checking with bills and statements. Key items could include your mortgage or rent, loans, HP deals, the balance outstanding on credit and store cards, your overdraft and utility bills, including land and mobile telephone. You should plan to honour all these payments – it’s just a matter of working out how you’ll do it.
3. Get organised
Organise all your bank statements, credit cards and utility bills into monthly files. Check your direct debits carefully and cancel any that should have expired or set up new ones to ensure you don’t miss any payments – some organisations offer a discount if you do this. Set up another file for your day-to-day spending, such as receipts for food, newspapers, petrol and fares. Make sure you arrange everything so you can see where your money is going in regular payments each month.
4. Set yourself a budget
Most of us will need to cut back, so use your list to identify any potential savings. For example, you might resolve to pay off your high interest store cards or reduce your utility bills. Make sure your budget is realistic, or you’re setting yourself up for a depressing failure – and always leave some money aside for treats and emergencies, or you risk falling off the financial wagon through sheer frustration or because of bad luck.
5. Think thrifty
There are plenty of ways to cut back on your spending, from buying food at markets and discount supermarkets to walking to work and swapping clothes. Hit the Internet for inspiration – there are sites that specialise in everything from economical food to free exercise routines and thrift shopping for clothes. Try voucher sites for money-off offers on essentials. You could also join an online service such as www.freecycle.org, where people offer to give away unwanted items. Or hook up with one of the many local networks that enable people to swap their skills – you can exchange anything from babysitting and cooking to carpentry and accountancy skills without paying a penny.
6. Tackle expensive debts first
Assess your debts carefully and prioritise the ones you want to repay first – which means finding out which are costing you the most. It may be possible to take out a personal loan to pay off several smaller debts that charge high interest. If you have a good history with your bank, you may also be eligible for an overdraft at reasonable rates. If you’re one of the many people currently enjoying a low interest rate on your mortgage via your lender’s Standard Variable Rate (SVR) or a tracker, it’s worth paying off a little extra each month.