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New Year, New Financial You! Part 2

Posted 03 January 2016

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Start the New Year right with a complete financial check-up with our help.

On to part two of our New Year financial clean-up. We’ll start with what to do once you have your results.

The results

When you’ve completed your budget, you’ll be able to see if you have money to spare, which is called disposable income (DI), you break even, or you don’t have enough to cover what’s going out each month.

If you have DI, you’re pretty much where you want to be. You can cover all your outgoings and you have some money to spare – you can use this to build yourself a savings nest-egg. If you’re breaking even, you can still cover your outgoings, but you have nothing left over. If you’re in this position, you may want to look further into your spending more, to see if there’s anywhere you can cut back, so that you have some DI at the end of the month. If you see that you’ve got less coming in than going out, it’s time to address the situation and get your finances back on track.

You may want to start by looking at what you’ve written down in your spending diary. Are there any things in your daily, weekly or monthly spend that you could cut out or cut back on?  You could be looking at things like your daily coffee and toast in the mornings, or the magazine you buy each month, or that gym membership that you rarely use.

If you find that even when you’ve cut all the things you can out of your daily spend, you still can’t get what’s coming in to cover what’s going out, it may be time to act.

If you’re still not sure if your finances are in a good state, you may want to read through 10 questions to decide if you need debt advice. Or, you could chat to a trained debt advisor, like the ones who work at DAC or those at the free and impartial Money Advice Service.


Check your credit report

Another things you may want to do is have a look at your credit report. You can do this for free using the free-trial that Experian and Equifax offer, but you will have to input payment details. So, if you do this, make sure that you set a reminder on your phone, or pop a note on your fridge, to cancel it before the 30-days is up.  If you choose to use Noddle, you can access your report for free, for life.

This important report details all the credit agreements you currently have, and have had in the past six years too, as well as any defaults, County Court Judgements (CCJs) or if you’ve been made bankrupt or have been on a debt solution.

Checking your report gives you the opportunity to make sure you’ve not been the victim of fraud and that there aren’t any mistakes on there either. If you see anything you don’t understand or that you think is not right, you can contact the credit reference agency and ask them to get it removed or amended. You can do this by filling in a query form on the agencies website.

The agency will then contact the lender to make sure the details are correct. If the lender believes they are, and refuses to remove the offending information, you can post what’s called a notice of correction – here’s the page on Experian’s website that details how to do this. This allows you to give a short explanation for whatever it is that you believe is wrong.

If your credit score is low, you may want to try improving it so that you can access the best deals when it comes to borrowing in the future.     

Improving your credit history – short and long-term

You can also do some things to help you improve your credit score. This will help you in the future when you want to borrow more credit, as a healthy credit score will allow you to access the best deals. So, here are three simple steps you can use to help your credit score, right now:

1.       Cancel – if you’ve got credit cards that you don’t use, cancel them

2.       Stop – if you have been applying for credit cards and loans recently stop, at least until you have repaired your credit score

3.       Register – if you’re not on the electoral register, add yourself now 

And in the longer term, here are some ideas from the Money Advice Service, which offers free and impartial advice on dealing with debt, on improving your credit score.

Some ideas for cutting back  

If you’re not yet at the point of needing a formal or informal debt solution, these ideas on how you can save money might be all you need to get your finances balanced again. Why not try them and see how you get on for a month or two.   

How to watch TV without a licence

4 ways you could be a smarter supermarket shopper

Are energy bills leaving you out in the cold?

Coping with school holidays on a tight budget

10 easy ways to save money when shopping

If they don’t help, please do think about speaking to someone before your debts become problem debts. You can speak, email or live chat with one of our trained debt advisors. We’re here to help you get your financial life back on track.   

Resolving problem debt

Once you’ve realised that you’ve have got a debt problem (and admitted it to yourself) you are well on the way to tackling it. And it’s important that you do so, because if you ignore the problem it isn’t going to go away, and it will probably get worse.  There are simple steps that you can take that will hopefully, help you to minimise the effects it’ll have on you in the future. For example, if you have a mortgage or any secured loans, these are loans that are secured against your home, you need to make sure that you pay all those first. Missing payments on a loan secured on your home will put it at risk. So, making sure these are paid first will reduce your chances of losing your house. If you’re still not sure what secured debt is, here’s a handy blog on the subject – What is secured debt and do I have any?      

Now you need to make sure that all your priority debts and essential bills are paid. If you’re not sure what these are, have a look at our blog on the subject What are priority and non-priority debts? and if you think that you need some further explanation on what essential bills you need to pay first, the Money Advice Service has a great article How to Prioritise your debt, as well as free and impartial advice on a number of other debt related problems and solutions.

What you don’t want is for this mismatch in what you’ve got coming in, compared to what you’ve got going out, to be too great or for it to go on too long. If it does, you may start to slip into problem debt. If you tackle the issue early on, you may find that just an informal debt solution can help. If your debts are more serious, you might want to think about a more formal debt solution

If you want to speak to someone about your problem debt and what solutions might be available, just choose one of the ‘contact us’ links from the left of the page. 

by Shelley Bowers

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.