New Year, New You - get your finances in order for 2010!

• Featured Articles
• Published: 30 Dec 2009 in Money and Credit Cards

By Esther Shaw

Many of us will have gone on a festive spending spree over the past few weeks, and may be dreading the thought of the credit card bill hitting the doormat in January.

But if you're worried about facing a financial hangover, don't sit back and wait for it to happen - act now to kick-start your 2010 money detox.

Deal with your debts

If you've saddled yourself with more debts than you can deal with over Christmas, sit down and write a list of all the money you owe - including credit cards, store cards, loans and overdrafts - plus any cash you owe to friends and family.

Once you've done this, draw up a list of your monthly expenditure - excluding debt repayments - and subtract this from your monthly income to show how much you can afford each month to repay your debts.

Play your cards right

If your credit card has taken a pounding - and you're paying a high rate of interest on your plastic - now is the time to review your borrowings.

One of the cleverest ways to clear hefty credit card debts is by taking out a 0 per cent balance transfer deal, such as the Virgin Money card offering 16 months interest free before reverting to an annual percentage rate (APR) of 16.6 per cent, or Santander,offering 15 months at 0 per cent before reverting to an APR of 15.9 per cent.

However, you need to be aware that moving your debts from one card to another is not as easy as it once was, as lenders are much stricter about who they will lend to - because of the increased risk of customers defaulting.

At the same time, you need to be aware of balance transfer fees; Virgin Money, for example, charges 2.98 per cent, while Santander charges 3 per cent.

Once you've transferred your balance, you also need to be disciplined about paying off as much as you can in the interest-free period - and not just settle with making the minimum monthly repayments.

 

Get into the savings habit

If you've been slow about putting money aside for emergencies, now is the time to get saving; as a rule of thumb, you should try to have savings equivalent to three months' worth of salary squirrelled away.

Your starting point should be an individual savings account (Isa) as you can avoid paying tax on any interest earned; Standard Life is currently paying 2.65 per cent.

Once you've used up your Isa allowance, you should then look to take advantage of the better rates on offer in the fixed-rate bond market.

While this will require you to lock your money away for a period of between one and five years, you can currently earn 3.75 per cent on a one-year bond from the State Bank of India, 4.25 per cent on a two-year bond from Saga, or 5.15 per cent on a five-year bond from the Halifax.

Savers have had a rough ride in 2009, and many are earning paying paltry rates on their nest eggs - making it more important than ever to keep a close eye on your money.

If you're not happy with the rate you're getting, you need to be prepared to switch.

The same applies to your current account, as there's no rewards for loyalty in this market - and many providers are still paying meagre levels of interest on balances in credit while levying high rates and penalties on balances in the red.

Bag a financial bargain

Retailers know that consumers find the January sales incredibly hard to resist, and now banks are looking to cash in too, by offering New Year sales on a range of financial products, such as mortgages, credit cards and savings accounts.

But while it's easy to get lured in by claims of great deals and discounts, you need to work out whether such offers really do offer good value - or whether they're a gimmick.

The key is to approach any such offers with caution, as just because a product is on sale, there are no guarantees you are getting a bargain - so make sure you take the time to shop around before signing up.

*Rates correct as of 23/12/09