Top Ten Tips to Beat the Credit Crunch
How to Improve Personal Finance and Get out of Debt
Sep 22, 2008
After a long period of cheap borrowing, easy credit and low-interest loans, the credit crunch has finally burst the “have it all now” bubble. Follow these tips to help secure your financial situation.
1. Monitor Your Finances
Get to grips with your day-to-day cash! Many people have no idea what they are spending each week. Keep a diary of daily purchases, and cut out on all unnecessary spends, from coffee shop lunches to unused gym memberships.
2. Debt Management
If you have debts, the most important thing is to pay them off as quickly as possible, to make better use of your monthly income. Do not take on further debt, as this will make matters worse. Pay more than the minimum monthly payment, and pay off cards or loans with the highest interest first.
3. Get Better at Budgeting
Work out your disposable income. Set monthly budgets for food and other essentials, and stick to them. Sacrifice treats and use your leftover cash to pay off any debts quicker.
4. Consolidating Loans
It may seem a good option to consolidate debts into one smaller monthly loan repayment. However, this is not necessarily the right solution, as it can encourage you to spend more and incur further debts, plus you will owe more. If you are really struggling to meet your payments, seek professional guidance.
5. Transfer Your Balances
Consolidating your credit cards is a good idea, especially if you have several. Take advantage of the best offers on introductory interest-free periods and transfer your balances to the new card. When the interest-free period expires, transfer again. Most importantly, cut up all the old ones! If you must have a card for purchases, keep to a budget and pay it off in full each month.
6. High-Interest Savings
High interest may mean bad news for your mortgage, but with savings account rates breaking the 7% barrier, it is good news for savers. Shop around for the best option for you, but go for accounts like a tax-free ISA or high-interest online saver.
Don’t even think about saving if you have a lot of debts; it is more important to clear those first. Any interest you make on your savings will only be wiped out by the interest you are paying on your debts.
7. Get a Good Credit Rating
Credit is getting harder to obtain, so make sure you do everything you can to maintain a good credit rating. Get a copy of your credit report to see where you need to improve.
8. Curb Your Spending Habits
When you go shopping, take a list and only buy what you really need. Purchase items in the sales. Escape the “buy now, pay later” syndrome – if you cannot afford it, save up for it rather than buying on credit, unless it is interest-free.
9. Be an Entrepreneur with New Business Ventures
There are lots of ways to boost your income with extra cash. Think about what you enjoy or are good at – from walking local dogs to starting up a business, you could turn a hobby into profit!
10. Be Resourceful
When money is tight, think about other ways in which to obtain the things you need. Save money by growing your own vegetables or making your own clothes. Not only will you save on cash, you could also discover new interests!
Remember, the most important thing is to keep control of your day-to-day finances and find debt solutions. By limiting what you spend and owe, you will limit the impact of an economic slump!
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