How to survive January's cashflow nightmare
Tuesday, 10 January 2012 11:01
By Kate Saines
It’s the beginning of January. You probably have at least two or three weeks to go until payday. And the Christmas splurge has left you, at best, skint, at worst, up to your eyeballs in debt.
It means, for the next few weeks, many of us will have no choice but to pull in the reigns when it comes to spending by leading as frugal a lifestyle as is humanly possible.
While it will be tough, help is at hand. Follow some of our tips to ensure the January cashflow crisis is less burdensome in 2012.
Dealing with the Debt
It’s essential you don’t bury your head in the sand when it comes to debt. When that credit card bill lands on your doormat, open it straight away, assess the damage and work out a plan to repay the balance.
In fact, with any debt you have acquired – whether it’s just from Christmas or has built up over years – your priority should be paying it off.
The Consumer Credit Counselling Service (CCCS) and Finance and Leasing Association advise you sit down and work out where you can make savings in your budget, so you can pay off what you owe to creditors.
Meanwhile, consider switching to a credit card which is easier to repay. There are a variety of zero per cent balance transfer credit cards available at the moment, some offering this interest rate for up to 22 months which will help you spread the repayments.
The Post Office Credit Card offers zero per cent on balance transfers for the first 14 months and on new purchases for three months.
Az Alibhai, head of credit cards at the Post Office, said: “We urge cardholders to check out their interest charges and consider switching to a deal with a zero per cent offer on purchases and balance transfers.
“People with debts spread across different cards may benefit from consolidating their debts on to one card to make them easier to manage and to further reduce the amount of interest being paid.”
Shopping around for the best credit card available is essential. But try not to make too many applications for credit cards as this could suggest to potential lenders that you are a risk.
If the debt on credit card, store cards or loans seems impossible to clear and you think you might have trouble making repayments, the CCCS and FLA recommend you speak to your lender immediately.
And they suggest contacting debt charities such as the CCCS or Citizens Advice Bureau for support if you are really struggling.
Fiona Hoyle, the FLA’s head of consumer finance, said: “If you’re already in financial difficulty, speak to your lender as soon as possible to discuss a repayment plan – don’t take on further credit.”
Compare credit cards - Find the right card for your needs
Reducing your Spending
Many people actually resort to spending even more on their credit cards in January in a bid to survive the cashflow nightmare.
A report by the Post Office suggests seven per cent of us will use our credit cards in January to pay domestic bills and a third will use them to fund sales shopping.
But, with 2012 set to be a tough year financially for households, the expert advice is to avoid increasing your debt in favour of cutting back.
Tracey Fletcher of Skipton Building Society said: “The challenging economic climate continues to bite, and make it harder for people to both make ends meet and save.
“However, there’s no doubt that developing the disciplines of careful budgeting, cutting down on impulse spending and saving – rather than borrowing – for the things we want, makes every situation easier to cope with.”
Examine your outgoings and see if there’s anything you can ditch to ease the pressure on your bank account. Do you, for example, have a gym membership you are not using or making the most of?
While January is traditionally the time when new gym memberships soar as people vow to get fit for the New Year, research suggests more of us are making resolutions to sort out our finances than lose weight.
Don’t get lured into the temptation of buying a never-to-be-worn outfit at the January sales by simply avoiding the stores. And see if there are any practical measures you can take to save money – such as making your own lunch to take into work, going to the pub less or buying ‘value’ products at the supermarket instead of ‘premium’ goods.
Compare a wide range of UK personal loans
Generate an Income
Payday might seem a long way away, but that does not mean you cannot find ways to create income from another source.
January is the perfect time to de-clutter. Instead of taking your unwanted items to the tip why not consider selling them on eBay or through similar marketplaces? Places like Amazon are great for selling old books and CDs too – possessions many of us are likely to own.
Items like old mobile phones can also be sold to recycling companies for a bit of cash. If you have a particularly hi-tech model, you could receive a decent payment.
Meanwhile, if you own any store loyalty cards which have points on them consider using these for your shopping. Hunt out any vouchers you have acquired which could help with purchases.
Follow Myfinances.co.uk on Twitter: @news_myfinances
Avoiding the Same Problem Next Year
If it was simply a big Christmas overspend which has left you with the mammoth financial hangover this January, make sure you avoid it next year.
Starting a savings account into which you can pay a small amount each month up until next December is a great way to spread the cost of Christmas before the event has even occurred.
Yorkshire Building Society has just launched a product specifically for this purpose, the Christmas Saver Account which pays a fixed rate of 3.5 per cent.
Savers can invest up to £1,200 into the account either in a lump sum, as regular deposits or just by paying in money here and there when they have some spare cash.
The account matures on December 1st, 2012 and is only available for a limited time. But anyone who misses out can still employ the same tactic using other savings accounts available.
Read more: Ten ways to avoid financial meltdown in 2012
Sign up to the Myfinances.co.uk newsletter to receive the latest financial news direct to your inbox.
Comments
Newsletter sign up