Putting Your Financial House In Order

This year, forget about making the same New Year Resolutions that you have made in the past and focus instead on getting your financial house in order. Cut out wasted money, get your personal debt in shape and start looking after your financial well being.

I'll say it as clearly as I can: Leaving your money in current accounts that earn no interest, failing to sort out your debt, procrastinating over sorting out your savings – these won't make you poor in the short term, but they'll sure make you financially flabby over the long term.

I know you lead a busy life, so here are five brief, no-brainer resolutions for 2007. Stick to them and you will find that your bank balance will be better off for it.

1. "I will sort out my credit cards" • No time to mess around here – you are simply throwing money away if you don't begin to clear debt now. Don't just pay out the minimum repayment each month, push to pay a bit more. • Once you've decided on an amount, make sure you set up a direct debit. By doing so, you can completely avoid incurring fees for late payment. • And are all your balances on one card? Don't mess around by trying to juggle more than one, make it easy for yourself to manage. • If your circumstances change and you experience financial pressure – tell us, we may be able to reduce your minimum repayment levels or even suspend payments for a time.

2. "I will use my tax-free ISA allowance" • The ISA, or Individual Savings Account, helps to shield your savings from the clutches of HM Revenue and Customs. Of course Gordon Brown would be happy if you did not use your annual allowance. • Far better to put your money either in a cash ISA, or if you are happy to accept the risk of capital lost for greater growth potential, you may wish to consider a stocks and shares ISA. • Anyone over 18 (16 for a cash ISA) can open one, and all the proceeds belong to you. You can use it to save for a nest egg for the future, or to supplement your retirement.

3. "I will review my buildings and contents insurance levels" • When was the last time you bothered to shop around for cover? By reviewing your policy frequently, you can ensure that you are getting the best and most cost effective cover for your circumstances. • Failing to update your insurance means that new items you've recently bought won't be covered by the policy. If you had to make a claim, this might mean you receive less than the cost price of the items – and you might come into conflict with your insurers for underestimating the sum you needed to protect. In some cases, your claim by be turn down out right.

4. "I will consolidate my debt" • A personal loan here, a car loan there, a couple of credit cards and a bank overdraft. Do you really know how much your debt is costing you? Thought not. • Start by getting rid of the overdraft, especially if you didn't arrange it, because unauthorised borrowing is very expensive. Then think about paying off your cards. • Find out whether you will incur a penalty for exiting your loan and credit agreements earlier than the full term.

5. "I will take out life protection" • No-one likes thinking about the unexpected happening, which is why we're all so useless at writing a will and arranging life insurance. Should you pass away without such cover, the circumstance of those you have left behind could become difficult. • A small sum each month in the form of your life insurance premium will ensure that in the event of your death during the term of your policy your spouse and dependants will be able to fulfil any financial obligation with the lump sum repayment. The harsh reality is that the absence of such a plan could result in the your family being forced out of the family home.

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