Canny is the word for your Christmas planning

Published on Friday 21 November 2008 18:07

EACH week The Scotsman brings you a top ten guide to pertinent financial issues.

Christmas comes too early this year for millions of households struggling with rising costs and general economic uncertainty. But a little less can still go a long way with some canny planning. Gregor Munro, a financial adviser at HBJ Gateley Wareing, offers his top ten tips on surviving the festive season with finances intact.

1 PLAN AHEAD Write down all your fixed expenses, such as mortgage, car, loan payments and school fees. Then write down all things you need in the run up to Christmas – food, fuel, presents, clothes and nights out. Now decide how much each of these will cost and how much you can afford.

2 PRIORITISE Ask yourself what your main financial needs are at the moment, then list them in order of priority and take into account time frame and the amount of money a specific objective might require. This list doesn't need to be set in stone. Sometimes certain objectives might be higher up the list than others but try to take at least a five-year view.

3 SEEK ADVICEShould you require help with this point then maybe it highlights the fact that it might be sensible to seek impartial advice from someone unconnected to you – such as a trusted friend or an independent financial adviser. Often it just needs someone to talk matters through with you to help you clarify your priorities – people can get too close to their own issues to see clearly and impartially what is best.

4 BUDGET Review your bank statements to see how much is coming in versus how much is going out on average – it might give you a surprise. Try if possible to reduce the outgoings by, say, 10 per cent each month and possibly redirect these savings, or any additional income you may receive at Christmas, to either a slush fund for emergencies or maybe to paying off debt or into your pension.

5 CREDIT AND STORE CARDS Try if possible to stay away from store cards, especially at Christmas, as they typically have much higher levels of interest than mainstream credit cards. The initial cost saving on the purchase that they quote is usually lost if you do not pay the amount off very quickly.

6 USE MORTGAGE INTEREST SAVINGS Reducing interest rates mean lower mortgage repayments for many. While it is true that capital values are also falling you should try and make good use of these monthly savings. If possible keep your payments at the same level and effectively pay off extra capital on the mortgage or reduce debt elsewhere (usually credit cards are charging a higher interest rate than mortgage rates).

7 SAVE TAX If you have investments or cash that is currently being taxed then try wherever possible to reduce this tax burden. Cash Isas, child trust funds, National Savings and pension funds can all house existing funds but in a more tax efficient manner. In the same vein, it is sensible to review your will if you haven't done so for some time. If you are lucky enough to receive a Christmas bonus at work remember this is liable to tax.

8 REVIEW YOUR INVESTMENT STRATEGY It might be a review or it might mean putting one in place. For example, where are your pension funds invested and when you do want to retire? Quite simple questions, but many people don't have an answer to them. If you can make a decision on when you might want to retire and how much income you might require at that time then you can start to work backwards and figure out how much you might need to contribute and what level of risk you are prepared to take.

9 EXPECT THE UNEXPECTEDDo you have a couple of months salary set aside? If not then you might decide that this is something that you need to address, as well as protection policies which protect a proportion of income should you lose your job through economic or medical conditions.

10 TAKE YOUR TIMEMany bad decisions are taken without full appreciation of the implications and options. If you do find yourself overspending at Christmas don't wait until the New Year to start putting your finances back into shape. Similarly, don't start 2009 ignoring bills or hoping that it will be all right. Speak to your lenders to agree a repayment schedule.