Managing Money

Some practical tips on keeping your finances in order:

1. Know how much you spend each month on regular bills and know how much you have left. It is obvious but you can't budget if you don't know how much spare you have!
2. If you have significant amounts of money in high interest loans or credit cards, take advice on moving them elsewhere to save hundreds.
3. If it works for you, if you work out that you can afford e.g. £100 per month on luxuries, take that out in cash after you get paid and don't use the cash machine until next pay day. It is a nice way of monitoring your spending money.
4. Try and keep at least 10% below your credit card limits so that you don't get pushed over by interest charges or emergencies.
5. Try and have at least £100 in savings to use for emergency times when you risk going over your overdraft limit.
6. Never miss a payment, even paying the minimum avoids a black mark on your credit history.
7. Have a plan to pay back debts which doesn't include waiting for someone to die or hoping for a payrise! If you can only afford the interest payments and have no more income on the horizon, you might need to cut back on something (get rid of Sky or Cable for instance) or take a part-time job on top of your normal workload.
8. Understand that paying off more debt money makes a difference in the long-term. Paying another £20 a month might not seem a big deal but can save hundreds over time on lower interest. This might not be obvious since your next interest payment might not seem much lower but you will pay off the balance more quickly as well as reducing the interest. Do this as soon as possible, it might be easier now to sacrifice some lifestyle for the additional payments but not when you get married/have kids/lose your job etc.
9. Do not pay for regular bills on your credit card unless you pay it off each month to get points etc. Doing this implies you cannot afford your outgoings which should be affordable from your current account. Credit cards are for emergencies or for paying for things abroad etc unless you have a definite repayment plan and understand your commitment.
10. It is MUCH cheaper to save up for something and buy it later than to get credit and buy it now. Even a 1 year loan at 10% will cost you £100 for every £1000. Lots of borrowing is much larger than this and at higher interest rates.
11. If you have multiple or large debts, take financial advice from an advice group, Citizens Advice Bureau etc even if you do not feel particularly burdened. You could save large amounts of money by switching providers, consolidating loans etc which will give you more money to pay them back sooner!
12. If you consolidate loans etc. to free up income, do not just go out and start spending it. If your debts will take you longer than a year to pay back, use the extra income to pay off the highest interest rate credit first. Again, over time this can save hundreds or thousands.
13. Buying things from a mortgage extension allows you to buy things you couldn't normally afford like cars and home improvements. Realise that although this seems cheap at mortgage interest rates, the rate is PER YEAR which means if you have a 5% mortgage with another 10 years to run (and the rate doesn't change!) and you borrow £5000, you might be paying back £7,500 over all (and the car might not even last 10 years!) This would be the same as a 1 year loan at 50% interest!
14. Get debt free while you are single, marriage and kids can be expensive!
15. If you are buying a house and your mortgage is a large part of your income, plan to get a lodger(s) which for the extra hassle is better financially, you don't have to keep them forever and it can make your first few years of mortgage easier. You can also use any 'spare' money to overpay the mortgage which will make the overall payback amount MUCH less (i.e. save tens of thousands over 25 years by overpaying early in the mortgage).