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Get Your Money In Shape For 2008!

Monday, 31 Dec 2007

So it's the last day of 2007. Whether you've had a great year, or a tougher time you'll no doubt still hope for better things in 2008. And getting yourself and your family into a strong, secure financial position is often one of our fondest wishes. So once those parties are out of the way and you've welcomed in the New Year, it's time to really start thinking about how you can make 2008 the year you get your finances in shape.

Kill those debts

Firstly, you'll need to tackle those borrowings. If you've got outstanding balances on credit cards, unsecured loans, overdrafts or any other type of debt it's important to work out how you're going to pay these back, before worrying about saving money. After all, there's no point having £1,000 in the bank earning 5% AER if you've got £1,000 on a credit card charging 11% APR!

So resign yourself to a few months at least of living on the bare essentials, free up as much of your money as possible and start a plan to kill those debts.

Snowball

Work out which of your debts is costing you the most in interest (i.e. which is charging the highest APR) and make it your mission to kill that debt first, even if it's not your largest borrowing. Throw any excess cash at it (we call this snowballing) and when you've cleared it, move onto the next most expensive debt and do the same again.

You'll be amazed how quickly you can do this if you focus, as many Fools contributing to our Get Out Of Debt discussion board can testify.

0% cards for balance transfers

If you are fortunate to have a pretty good credit history, look into transferring expensive debt to a 0% credit card for balance transfers. Although you'll typically be charged a fee of around 2.5%, these marvellous bits of plastic can give you up to 12 (sometimes 15) months breathing space where no interest will be charged on your balance, giving you plenty of time to get that debt paid back.

Emergency Fund

Once you've got your debts under control, it's time to think about creating that emergency fund, or rainy day nest egg. By saving between three and twelve month's income in cash into a high interest cash ISA/savings account, you can give yourself and your family such much needed security, should the worst happen. And while that may seem like a lot of money, consider how much you could need should you be out of work for a few months, or your boiler need replacing, or  the car require expensive work etc? This cash can help you sleep better at night, I can assure you!

Once your debts have been cleared, move the money that you were paying your lenders to your emergency fund instead, and you'll build up a lovely nest egg in no time - and by saving £3k of it each year into a cash ISA you'll keep all of the lovely interest earned, too. But remember, this money is for emergencies only - not to fund that luxurious holiday you'd quite fancy!

Cash ISAs

Top Cash ISAs of the moment include National Counties BS' Guaranteed ISA, paying 6.26% and Kent Reliance BS' Direct mini-cash ISA, paying 6.21% AER. You only need a pound to open either account and you'll get instant access to your cash.

Insurance

Finally, now you've got your debts under control and an emergency fund in place, it may be time to think about life insurance. Read this article for more information.

So check out these top tips to help you tackle your finances and get them in shape for 2008. Happy New Year!

Source: http://www.fool.co.uk/news/your-money/2007/12/31/
get-your-money-in-shape-for-2008.aspx