2019 New Year debt resolutions.
2018, what a year for finance, and turmoil. I’m happy if I never have to type, or hear the ‘B’ word again, the ‘B’ word that is Brexit.
Building financial stability for customers can be made easier when you believe governments have some idea where they are going.
But what can we learn from 2018, and what New Year resolutions can we practically deal with as we move forward?
The first of the resolutions is on debt. Make 2019 your year – the year you grabbed hold of your finances and made them work.
Start with being disciplined with your expenditure. It’s difficult to save when we spend too much. I remember putting £150 of our money into a pot at the beginning of the month and when it was gone, we both had to stay in. On the pot we had a picture of what we were saving for (a deposit) and that created the self-discipline.
Don’t compare yourself to others. Most people we have helped out of debt, began with a simple approach of not comparing themselves to others. Social media and all its filters would have you believe very quickly you have a worthless life, if you measured yourself to others. It is not as they imagine it, let alone as you imagine it, believe me.
Do you really need it? A purchase of any new item gives you a short-term dopamine rush. But that’s it, it’s a one-off that will take some months of pain to repay. Ask yourself if you really need it at all. In your mind you will look great for those first few moments, but everyone else is too busy looking at photos of themselves on social media to even notice yours.
Create an emergency fund. Most businesses and families fail in finances because of cashflow. Poor cashflow is stressful. It’s better to feel in control of your financial life rather than to be in reactionary mode
January sales. Well, they never are, are they? If you really need something, trot along in February when they have maximum staff and no income. The deal will be better then. All signs are that retailers are under pressure.
Be careful with credit cards. They’re often described as useful to buy things you don’t need, with money you don’t have, in the most costly way possible. Tap and go makes it really easy to mount up quick, short, sharp bills you don’t even see.
As part of your discipline, actually write each expenditure down or into a spreadsheet and then begin highlighting a month later what you really didn’t need. You’ll be stunned by how colourful that sheet looks at the end of the year.
Pay off the costly credit cards. If you are struggling to pay a credit card, you are well within your rights to approach the company.
You can only be asked to repay what you can afford and it is now against the law for creditors to hassle you. That said, creditors need to be spoken to. First thing in the New Year, call them and rearrange your debts.
Often you can have the interest reduced to as little as zero, or suspended to get yourself back into the position where you are able to at least move forward as opposed to just standing still, by using the savings in interest to pay off the capital.
Use the cheapest money available when dealing with debt. Some of the long-standing credit card debts are upwards of 24%. Many don’t think to add their debts to their mortgage as they believe they are paying it off over 25 years. Not so. If you can borrow for less than 2% per year at the moment, why pay 24%, then use the savings each month to repay capital payments at the end of the year.
There is no greater feeling than to be in control of debt or have none. Retailers might thank you with nice sparkly paper, but they won’t be there when you are up against it.
Peter McGahan is Chief Executive of Independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority.
Worldwide Financial Planning Ltd are authorised and regulated by the Financial Conduct Authority.‘The FCA does not regulate Credit Cards, Will Writing and some forms of mortgage and Inheritance Tax Planning.’ Information given is for general guidance only, and specific advice should be taken before acting on any suggestions made. All information is based on our understanding of current tax practices, which are subject to change. The value of shares and investments can go down as well as up. Your home may be repossessed if you do not keep up repayments on your mortgage. For the purposes of mortgage Worldwide Financial Planning is a credit broker and not a lender.