Monday, January 26, 2009
Category:
Personal Finance Tips
It’s the beginning of a fresh year, and many people will be setting themselves resolutions for the coming twelve months – perhaps getting fit or embarking upon a new hobby.
However, during this period of economic unrest, Defaqto suggest that getting your finances in order is more important.
As a result, Defaqto’s team of experts have combined forces to draw attention to four key financial New Year’s resolutions in a bid to make 2009 as care-free as possible.
Firstly, manage your debt. David Black, Defaqto's Principal Consultant for Banking, recommends overpaying monthly credit card and mortgage payments as interest rates have reduced. However, with regards to the latter, this should only be carried out if early repayment penalties do not apply. Black commented: "With lower interest rates your monthly payments may reduce, but by overpaying the minimum amount required each month you will begin to reduce your debt more quickly."
Secondly, don't cancel your insurances. Head of Insight, Brian Brown, advises people not to cancel insurance policies in a bid to reduce outgoings.
Brown suggested: "You need to carefully examine your personal circumstances and your policy wordings to form a judgement as to whether to retain your policy, seek cheaper alternatives or drop it altogether.
"For instance Payment Protection Insurance is the first safety net people fall back on before being forced to claim state benefits, so think carefully about how you would cope with paying off credit cards, loans and mortgages without an income."
Thirdly, start planning for your retirement. Matt Ward, Defaqto's Principal Consultant for Pensions and Wealth Management, feels that it is never too soon to establish a retirement plan.
Ward commented: "Spare cash is likely to be hard to come by at this difficult time, particularly with Christmas having only just passed. But it is important not to let your retirement planning slip off the agenda. Every year that you delay paying towards your retirement can significantly reduce the amount of income you will have once you retire."
Finally, diversify your investments. Defaqto's Principal Consultant for Investments, Fraser Donaldson, believes that the diversification of investments is currently the best approach.
Donaldson remarked: "With so much uncertainty in the financial market at the moment it would be sensible to diversify your investments.
It is probably too late to cash in now, and there's a good chance that the markets are nearer the bottom than the top."
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Homeowners that have resolved to organise their finances this year may wish to consider taking out a secured loan to
consolidate existing debts into one manageable, monthly repayment. This would not only be more convenient, but may also result in lower monthly outgoings. One of many options available, a secured loan is usually repayable over a term to suit the borrower from 5 to 25 years. However, when consolidating your debt it should be remembered that this may increase the amount you pay back overall and extend the repayment periods of your debts.
