5 tips to straighten out your finances
Pay off your debt
Pay off your debts -- good advice that's mostly observed in the breach! Seriously, though, most consumer debt has a very high rate of interest. You can save a lot of money by paying it off altogether. In addition, there is the psychological benefit of living debt-free. Instead of borrowing more to pay for major purchases and holidays, you can save your money to pay for them.
Beware, however, the consumer debt consolidation pitches that you hear about in advertisements. Many of these services will charge a substantial fee, and will want to take a second mortgage over your home. In addition, some people consolidate their existing debt, and then go out and start the debt accumulation process all over again with a clean credit card. If you're serious about debt consolidation, research the alternatives yourself and find the best deal. If your credit rating is good, some lenders may be prepared to make an unsecured loan available to you at an attractive interest rate.
If you have serious debt problems, you might consider getting some advice. Your local Citizens Advice Bureau may be able to help.
Use tax advantaged methods to save
There are a number of ways to get a tax break for accumulating wealth. Consider which ones might be available to you. An Individual Saving Account (ISA) could be a good starting point. Do you have a pension? Is there a share scheme (or save as you earn scheme) available to you at work?
The effect of the tax benefits associated with these methods of saving together with the compounding of interest and dividends can, over time, be substantial. If you're a regular saver, you will find that you're able to put together a significant nest egg over a period of several years.
Build up a rainy day fund
Given the uncertainties associated with a troubled economy, you need to have a contingency plan in case you lose your job or, for some reason, become unable to work. Many experts recommend that you have at least six months' worth of living expenses available in cash. This is particularly true if you have a mortgage or other commitments.
These funds should be invested conservatively, and so that they are readily at hand -- a deposit in a bank or building society account or an investment in gilts might be appropriate, for example.
If you have a family or other dependents, make sure you have life insurance
Even a simple, term life insurance policy is far better than nothing. If the worst happens, will your family be able to get by? Will they lose their house? Although those are not easy questions to contemplate, a responsible head of household needs to face them and take appropriate action.
The Consumer Financial Education Body website has some useful information about different types of insurance and how they may be of benefit.
Write a will
If you die without a will, your assets might not be distributed in the way that you want or in the way that your family needs. With a will you can establish certainty about the disposition of your assets. It also enables you to make more effective provision for particular individuals' needs. For example, you can provide that certain assets are to be put in trust for certain people, and if you have young children you can appoint a guardian to look after them in the event the unthinkable happens.
There are do-it-yourself will writing websites, books and software available. In addition, there are many solicitors who can help you write a will - you can find one locally either by doing your own research or by way of a free solicitor matching service like Contact Law.
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