Pay off your debt and improve your finances in 2012

Last updated: Jan 3rd, 2012
Feature by Nathalie Bonney
Given the battering our finances took in 2011, resolutions with a financial twist may be in order – and unlike some of the flash-in-the-pan vows we make (to eat, smoke, drink less and exercise more), fixing our finances for 2012 could have a lasting impact.

Whether you have unhealthy debt levels or want to plan for your retirement, take the time now to rethink your finances and see the positive side effects throughout 2012.

PAY OFF YOUR DEBTS

One-tenth of Brits are constantly in the red and 62.2 million credit cards are in use in the UK. In an ideal world we would all clear our credit cards each month before the interest kicks in and never exceed our overdrafts.

Sadly, an unexpected car bill or plumbing job means that even the most virtuous of borrowers could find themselves on the wrong side of debt. The key is to have a responsible attitude to borrowing.

20 ways to escape debt for good

Make sure you're always on the most competitive deal possible. Comparison sites moneyfacts.co.uk and moneywise.co.uk will help show you the best credit cards and overdraft accounts on the market. With credit cards, avoid making only the minimum monthly payments.

How to get out of debt

For example, if you paid just the minimum 2.5% of your balance each month on a credit card debt of £2,500 charged at 18.4% APR (market average) it would take 26 years to repay and cost £3,531 in interest charges. Paying an extra £20 per month would clear the debt in six years and seven months, with a lower interest bill of £1,286.

If you've got a high interest rate on your credit card, consider taking out a balance transfer card. Such cards include substantial 0% interest periods so you can make repayments without racking up further interest. Remember, you should always clear the most expensive debt first.

Check out the best credit card rates

FIVE WAYS YOU CAN IMPROVE YOUR FINANCES... NOW

Sometimes the smallest of measures can have a profound effect on our finances. Here are five easy steps to take:

1. DROP A BRAND
Say goodbye to the brand names at the supermarket and watch your weekly shopping bill drop.
2. SWITCH ENERGY DEALS
Energy bill prices are on the up but by switching providers, opting for paperless bills and paying by direct debit, you can make significant savings.
3. TAKE ADVANTAGE OF FREEBIES
Use websites such as vouchercloud.co.uk and vouchercodes.co.uk to download moneyoff coupons for shops and restaurants.
4. GET CASHBACK
Shop through cashback websites such as quidco.com and topcashback.co.uk to make even more savings but don't be tempted to shop for extras you don't need.
5. MAKE YOUR OWN
From packed lunches to home-cooked curry and pizza, ditch the takeaways and save a significant weekly sum.

More about