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Jane Clack, Money Advice Consultant at PayPlan, shares her best tips and tricks to help you avoid the dreaded New Year debt hangover…

It’s safe to say that 2020 hasn’t been easy for any of us, but there’s light at the end of the tunnel. The rollout of Covid-19 vaccinations has already begun across the country, meaning that (hopefully) we’re only a few more months away from things starting to go back to normal.

In the meantime, it’s more important than ever to look after your finances as we head into 2021. The last thing you want is a debt-induced financial hangover lingering around come January, so here’s a few of my top tips on how to start 2021 with a clear head and a healthy bank balance.

Start budgeting

If you’ve never used a budget before, then why not make it your New Year’s resolution? In my time as a Money Advice Consultant, the one thing that clients have told me has helped them the most over the years is creating a monthly budget, and sticking to it.

Getting an idea of where your money goes each month makes it much easier to start saving and can help you realise where you might be overspending. The Money Advice Service has a free online budget planner you can use to get started.

Use a benefits calculator

You should always make the most of any benefits that the state offers you, and in an age of Covid-19 this is no different. Benefits can make a real difference in terms of how much disposable income you have each month, and you might be surprised at how much you could get. It’s easy to see how much you’re entitled to online – just use a free benefits calculator.

Be wary of buy now pay later

They can seem enticing initially but Buy Now, Pay Later schemes can become a problem if you allow payments to build up. From 2018 to 2019 PayPlan saw a 49% increase in clients entering into a debt plan with buy now pay later problems, and 73% of the people we surveyed in our research said that buy now pay later had contributed to towards a debt problem later on, so be careful when using them.

Set targets for 2021

Many people find that having a goal to aim for (save X by June 1, 2021, for example) makes setting money aside easier. Having a target means you’re probably more likely to stick to saving, and gives you a little more freedom too; if you do overspend or underspend one month, you can make up for it by putting a little more or less away the following month. You might find it easier to do this rather than feeling like you have to save the exact same amount each month.

Think about it – if you put aside just £1 a day, you’d have £365 at the end of the year. What could you put that towards? If you can spare £2 a day, that’s £730. The little savings do add up over time and can make a big difference!

Don’t worry about not spending enough

Many people feel they have to spend lots of money to make things special for their children, family or friends. This applies to Christmas, birthdays and other celebrations. It’s understandable, especially given everything that’s happened in 2020, but you shouldn’t feel pressured to spend what you can’t afford, as this will only result in further money worries down the road. Spend what you can on presents and festivities, and if you can’t afford to buy for as many family members as you usually can, then don’t worry about it – nobody is going to blame you for living within your means.

Shop around

If you haven’t yet bought a planned gift for your family or friends, make sure you get the best deal on whatever it is you’re buying. Amazon isn’t the only online retailer out there and you might be surprised by the lower prices you can get at smaller online shops as well as the bargains you can get in-store. Be sure to look around thoroughly before you buy.

My advice of shopping around also applies to your weekly shop, broadband, phone and utility bills. Make sure you use comparison websites to make sure you are getting the best deal out there and if you feel you are overspending now, don’t wait to change it! Act now and start saving more for the important things in life.

Don’t buy everything on credit

Credit cards can be useful to tide you over while you’re waiting to get paid, but don’t go overboard on them. Not paying them on time can mean you’re liable for costly late payment charges, and these might be especially expensive if you’ve used them to pay for big-ticket items.

To be safe, always leave a little extra money aside to make sure that no matter what, you’ll be able pay your card off in full when it’s due – there’s nothing worse than an overdue credit card bill!

Do your own credit checks

If you have to do your spending on a credit card, look carefully at the terms and conditions of the card before you use it. Lower interest rates aren’t always necessarily better; sometimes cards with higher interest rates have interest-free periods on them, so if you’re certain you can pay back the card in time you could save a considerable amount on interest fees. Always read the small print!

Watch out for payday loans

A payday loan is another scheme that might seem attractive, but it can be very costly if you can’t stick to its terms. Some payday loan lenders have very high interest rates and incredibly costly charges for late payments, so try to steer clear of using them if possible. If you must use one, then you need to be absolutely certain that you can pay back what you’ve borrowed in full and on time.

Seek help

You might be someone who, for reasons beyond your own control, has fallen into debt despite  managing your money carefully. This happens, and it’s nothing to be ashamed or embarrassed about – especially in the current climate.

If this sounds like you it’s important to remember that there’s always help out there. Whether you choose to get free debt advice from the company I work for, PayPlan, or another debt advice provider, getting professional help with your debt is always a smart choice.