1. Draw up a sensible monthly budget for your New Year spending. Make a list of all of your necessary monthly payments and expenditures and make sure they are covered by your monthly income. And make sure you stay within your budget guidelines.
2. Use cash instead of credit cards. Have one primary credit card and use it only for emergencies or major necessities. Put your credit card away in a safe place, not available for everyday use. Also cut up store cards – these carry very high rates of interest.
3. Cut down on luxuries and unnecessary expenses. It may sound obvious, but small things like bringing lunch to work rather than eating out, or using your mobile phone less for social calls can make a definite difference towards trimming outgoings. Before you go grocery shopping, write a list of everything you need...and stick to it.
4. Be sales savvy. The January sales are a great place to pick up a bargain or two, but before you buy, ask yourself if you really need it. It might be a great opportunity to buy the new toaster or sweater that you have needed for ages, but create a plan before you go. Don’t be tempted by items you don’t really need just because they are discounted.
5. Try to find an extra income. Do anything you can (as long as its legal!) to bring in extra money to help tide you over until you’re back on your financial feet. Even if you have a full-time job you could work overtime; try babysitting, tutoring or using any skill you can to bring in a little more cash.
6. Pay off the credit card bills with the highest interest rate. Firstly, pay all balances to below 50% of the card limit, because balances above this level are a threat to your credit score. Then pay off the credit card with the highest interest rate. Next do the same with the card that has the second highest interest rate. Continue until you reach the credit card with the lowest interest rates.
7. Avoid borrowing to cancel out debts, especially consolidation loans - even if Christmas has put you into the red. It is easy to be convinced that this is a way of helping you get out of debt, however, consolidation loans are simply a means of combining all of your debt. You could end up having everything repossessed because you’ve tied it all up in one loan.
8. Contact your creditors and try to work out repayment plans. Many are willing to sit down with you and organise repayment schemes that will help them get back what they are owed, without having to send in the bailiffs.
9. Get organised. Working your way through tight economic times is all about organisation. Organise your paperwork and important documents in a folder, label them clearly and lay your financial information out in a system which you understand. Knowing every detail of your credit situation puts you in control, and will instil in you a positive mind frame to make all these changes.
10. Start saving for next Christmas now. Try to save a little each month. Set up a standing order to a savings account. You will be surprised how quickly you will forget you are saving, and by next Christmas you will find you have a specific pot of money to buy all your presents.