Today is Blue Monday, supposedly the most depressing day of the year.
The third Monday in January has earned the title due to a combination of post-Christmas comedown, continuing darkness and cold, and the avalanche of credit card bills that tends to land on the doormat at this time of year.
It’s a particular problem this year, because many of us spent more on Christmas 2021 – perhaps because we were ‘making up’ for a lockdown festive period in 2020 – and figures out this month from the Bank of England show that we owe a collective £1.2billion on credit cards, the highest since lockdown eased in June 2020.
While we can’t do much about the dark nights and the lack of festive feeling, tackling your finances is a proactive way to chase the blues away, and is particularly important given the increasing cost of living.
We’ve compiled seven practical ways to improve your finances this Blue Monday.
Make a plan to pay off your debts
It is easy to stick your head in the sand about debt, but better to start 2022 with a plan to pay it back.
Kirsty Simpson, financial planner at wealth manager Brewin Dolphin, says that it is best practice to try to clear Christmas debt as early as possible in the New Year.
‘Starting with a clean slate in 2022 will give you a fresh start, with no outstanding payments impacting on your future financial plans and savings’, she says.
As a rule, it is best to prioritise those debts where not paying them back will have the worst repercussions.
‘Missing repayments on secured debts, such as a mortgage, may result in your home being repossessed, while not paying council tax can result in you being put in prison. These should be top of the list,’ advises James Andrews, senior personal finance editor at money.co.uk.
If you need more help, Citizens Advice has debt advisers available on the phone at 0800 240 4420. The right repayment solution for you will depend on your level of debt and income, as well as your assets.
For some it will be enough to talk to each creditor individually, while others will need a central debt management plan.
An Individual Voluntary Arrangement (IVA) is a more formal next step, while alternatives include a Debt Relief Order or even bankruptcy.
Whichever is right for you, ensure that you speak to an accredited expert first, as there are unscrupulous organisations that will try to mis-sell debt management plans.
Switch your mortgage rate if your deal has finished
If your mortgage deal has run out, chances are you are on your lender’s default Standard Variable Rate.
This is unlikely to be the cheapest deal for you and you could save hundreds of pounds a month by switching.
According to Moneyfacts, the average two-year tracker mortgage interest rate is 1.75 per cent, while the average two-year fix is 2.38 per cent. Meanwhile, a Standard Variable Rate average is 4.41 per cent.
Eleanor Williams, finance expert at Moneyfacts, says: ‘As the threat of rising inflation and potential for the cost of living to continue to rise squeeze household budgets even more, there may be borrowers prompted to act sooner than perhaps they might have planned to in considering securing a new mortgage deal.’
Audit your household bills
Many of us resolve to cut spending in January but, with the cost of living rising, particularly the cost of food and energy bills, this is likely to be particularly tricky. However, there are steps you can take to bring bills down.
Check whether your broadband or mobile contract is out of date – comparison websites such as MoneySuperMarket can help you to find cheaper deals. And check your bank account for subscriptions you no longer use, such as gym memberships.
Will Owen, energy expert at comparison site Uswitch, says the average homeowner could save more than £120 a year by turning down the central heating thermostat one degree.
Sell unwanted goods for cash
If you have unwanted Christmas presents, clothes, tech or furniture, you may be able to sell them for cash – often without leaving home.
‘You might be surprised at what specific items can fetch on websites such as eBay, Gumtree and Facebook Marketplace. You can easily pocket £50-£100 for just a few hours of your time collecting up old gadgets, clothes and books,’ says David Beard, CEO of financial comparison site, Lendingexpert.co.uk.
Some sites, such as Ziffit and Music Magpie, allow you to scan items including DVDs and CDs by their barcodes and then offer you a price for them. This can be a very quick way of decluttering and making money.
Or, if a traditional car boot sale is more your style, you can check out Car Boot Junction to find sites in your local area.
Start an emergency fund
Everyone should have an emergency fund, in case an appliance or a car breaks down, or you are out of work for a period. But experts acknowledge that it is very hard to build one up when times are tough.
‘It’s often recommended that individuals have between three to six months’ worth of regular expenses saved in a “rainy day” fund as a protection for unforeseen emergencies,’ says Emma Watson, head of financial planning and advisory services at Rathbone Investment Management.
‘While it’s not possible for everyone to save this much, trying to save a little here and there can build up to a bigger pot over time.’
Setting up an account linked to your current account to put savings into can be part of the battle, since once the money is not readily available you are less likely to spend it. Setting up a direct debit into this account as soon as you are paid can also help you save without noticing it.
Some regular savings accounts that allow you to pay in money monthly also offer attractive interest rates. Nationwide’s Flex Regular Saver and Newcastle Building Society’s Fixed Regular Saver both offer two per cent interest, for example.
Another way to save is to check whether your bank offers an automatic way to ‘round up’ transactions or save without noticing.
Lloyds and Bank of Scotland offer a Save The Change function, and Nationwide has an Impulse Saver, while apps such as Plum and Chip offer similar functions.
Save money on food
We all know that food prices are rising, but there are still ways to cut the cost of your weekly shop.
Experts at NetVoucherCodes suggest making a list before you go out and ensuring you don’t deviate from it, as well as understanding supermarket ‘tricks’ to ensure you don’t pay too much.
‘Supermarkets strategically place their most profitable items at eye level, so browse through all the shelves, both high and low,’ a spokesman from the site says. He also suggests checking out the World Foods aisle for cheaper products.
He adds: ‘Products such as rice, sauces and spices are far cheaper here and you will get more for your money.’
Transfer credit card debts to a zero per cent deal
If you have credit card bill to pay, you can carve yourself out some breathing space by shifting those debts to a zero or low interest rate deal.
The very best balance transfer cards require a good credit score, but people a poorer score can still apply for cards with a low rate.
At present, some of the best balance transfer cards available include Virgin Money’s deal, which gives you 35 months at zero interest to pay back your debt.
However, you pay a fee of almost 3% of your balance to transfer it.
Cheaper but shorter options include Barclaycard’s balance transfer card, which gives you 27 months interest free, charging a fee of 1.28%.
If you have a poorer credit score, try cards from companies such as Fluid and Vanquis, although these come with fees to transfer and shorter periods.
If you can transfer money to a 0% credit card, this will give you a welcome breathing space – but it isn’t permanent.
And it is vital that you make a plan to pay it off, otherwise you will have the same problem again when the rate ends.
You could consider transferring money into a separate account to pay it off in one go, or setting up a monthly direct debit that will clear the balance by the end of the 0% term.
If you want more tips and tricks on saving money, as well as chat about cash and alerts on deals and discounts, join our Facebook Group, Money Pot.
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