June, 2010

Of all the monthly payments most people have to make, mortgages are usually the most costly. It makes sense then that falling behind with such hefty payments has a serious risk attached to it. Put simply, if you don't keep up with your mortgage payments, and subsequently suffer serious debt problems with your mortgage provider, your home could be repossessed.

Repossession as a general concept means that a financial institution (the lender) has the right to take back property or possessions classed as collateral in an official lending arrangement. In terms of mortgages, repossession means that the lender can actually take your home away from you if you regularly fail to meet your payments.

Home repossession is a worst case scenario for most mortgage policy holders, and it becomes a very real worry for people with escalating debt problems, as they struggle to keep on top of finances. The thing to remember with repossession, however, is that it is always a last resort used if all other negotiations fail.

Taking action on debt

Most mortgage holders know the feeling of struggling to keep up with monthly payments, especially if your life unexpectedly changes, or you suffer a financial setback – such as losing your job or illness prevents you from working. The important thing is to act early on mortgage arrears, communicating clearly and honestly with your lenders to reach an agreement before the situation spirals out of control and you lose your home.

If you are feeling overwhelmed, confused or that the situation is out of your control, the best thing to do is to seek professional debt advice. There are many debt management solutions available which may be able to help alleviate some of the underlying causes of your debt problems. These include Individual Voluntary Arrangements (IVAs), debt consolidation loans, Trust Deeds amongst others.

Your time as a student is supposed to be one full of new experiences, educating you to excel in the classroom and preparing you for life as an adult in the working world. Unfortunately, both of these cost money and nearly all students leave their studies quite heavily in debt.

There are ways, however, that you can enjoy your time studying, without ruining your financial future and starting life in debt and with a poor credit rating. Most students can't really do much about tuition fees and maintenance loans, but most other things usually come down to a few key money management issues:

Spending

This is your everyday expenditure, on essentials like food and laundry, but also on luxuries like nights out and non-essential shopping etc. The best way to manage your everyday spending is to make a budget and find ways of sticking to it. Save yourself a realistic amount of money for the fun stuff, but ensure that all your essential costs are covered first; that way, you won't end up in money trouble when you need to pay the bills.

Credit cards

Are you thinking of getting a credit card for some extra spending money? Whilst you may think it would be nice to have a safety cushion for certain times, don't do it. Having a credit card inevitably leaves you vulnerable to developing credit card debt problems in the future, when you'll already have other debts (like your student loans and overdrafts) to pay off. What's more, credit card debts are usually at a higher rate of interest than your student loan, so will more than likely cost you much more to borrow over the long term.

Savings

As you know your student loan debt is building up, it can be a good idea to put some money aside if you can afford it. Whether it's Christmas cash or from a part-time job, you should consider starting a savings account at a bank or building society to save for the unexpected, a gap year or even just for a long summer away from your books!

Insurance premiums can be crippling for your finances but having cover for your home or car is essential, just in case the worst happens, especially if you are worried about your finances or the risk of debt management issues arising if you had to pay for costly repairs. However, just because you need insurance, this doesn't mean you should pay a fortune for it.

There are many things you can do to save money on your car insurance, but you'll need to do some research beforehand. Understanding all the extra charges and small print may take time, but it can save you a bundle in the long run.

Try the following suggestions – they may just save you money on your policy:

1.       Be honest and accurate with insurers

Being dishonest with insurers or failing to disclose all information may get you a cheaper policy in the short-term, but it can get you into big trouble sooner than you think. Therefore, be honest about things like annual mileage, where the vehicle is stored etc. And also be accurate with yourself in terms of the level of cover you need – do you really need full cover or would third-party, fire and theft cover you adequately?

2.       Leave the car alone

Resist the temptation to modify your car, as these changes can sometimes drive your insurance premiums through the roof. People who add on body kits, sub-woofers and the like are usually deemed by insurance companies to be more of a risk, probably due to the connection with boy racers and the like.

3.       Be a good driver

This is not only a good general practice to follow; it can also get you a hefty no claims discount over a number of years and lower your premiums (insurers aren't fond of speeding tickets, fines etc). You could also try to improve things further by taking an approved Advanced Driving course, as this too is often looked on positively by insurers.

4.       Volunteer excess

Opting to pay a little more voluntary excess can make your policy cheaper overall.  However, only volunteer what you can realistically afford to pay in the event of an accident. By agreeing to pay a larger amount upfront in the form of an excess, you're less likely to use your insurance for a smaller job – so insurers are less likely to have to pay out.

Finally, make sure that you don't simply accept the first annual renewal offer that is sent to you by your current insurer, as insurance companies have a bad habit of rewarding your loyalty to them with above-average increases to your premium.  Shop around for the best policy by using comparison sites such as Moneysupermarket and Compare the market, as these show a number of similar policies together and enable you to pick the most suitable (and best priced). You can then use this information to go back to your current insurer and they may agree to reduce their original renewal offer.

Generally speaking, saving money in the home comes down to the little things – making small changes to your lifestyle that add up to a nice little nest egg saved in the long run. Cutting down on your household's energy usage is a great example of this. Using less gas and electricity is not only good for the environment; it's great for your bank balance too.

Changing the habits of a lifetime is easier said than done though, and you have to get the whole family on board if you want to see a real result in your monthly statement. To start you off, here are some tips and advice on saving energy in the home…

Heating

Insulating your home is the best way to prevent energy wastage as it stops heat escaping; this means you won't have to rely so heavily on your central heating system, as any heat will be kept in for longer. You can buy insulation fibres from most home/DIY stores, which can be laid in your attic space relatively easily Рso it can be a very quick and easy way of reducing heat wastage to save money. ¬†Other insulation techniques, such as cavity wall insulation or solar powered systems, can be more expensive initially and may mean a larger upfront cost ‚Äì which could take many years to recoup the benefits.

Lighting

Fitting energy-saving light bulbs is a quick and easier way to reduce your energy bills. There are plenty of varieties and different wattages to choose from at present, all designed to use about 25 per cent of the power of standard light bulbs whilst having a much longer lasting lifespan. ¬†Also doing simple things, like turning off lights as you exit a room, can have dramatic effects on the amount of energy used Рas you won't be paying to illuminate a room that's empty.

Appliances

• Try using washing machines and dishwashers on shorter or lower degree economy settings, as you may get the same results but with less electricity being used and wasted.
• ¬¨‚ĆAvoid using tumble dryers, hang your washing outside or on a washing maiden instead.
• Don't leave any appliances or electrical devices on standby. They still use power in this state, so it's better to unplug them instead. ¬¨‚ĆThe same goes for clocks on your microwave or cooker ‚Äö√Ñ√¨ do you really use these unless you are cooking? If not, switch them off at the mains until you're cooking to save a few extra pennies.

Providers

With all of your energy suppliers, make sure that you are paying the lowest amount possible by checking online and by shopping around for the best rate. It's relatively simple to search on websites such as Moneysupermarket or Comparethemarket, so you can switch provider quickly and start paying less for your energy than previously. Many providers may have a minimum length of time you can stay with them for, so check to make sure there are no exit fees for leaving early.

As every parent knows, raising children is an expensive business and can lead to serious debt management problems if finances are not managed correctly. If you don't want your children to inherit debt problems, you need to know how to look after your family without crippling your finances.

Here are our top tips for frugal parents:

• Life insurance and wills ‚Äö√Ñ√¨ It's not a nice thing to contemplate, but your children's financial future may depend on your income. In the event of your death, life insurance ensures your family receives a cash sum – to cover living expenses and clear debts – whilst making a will gives you control over how your assets are divided.
• Save for education ‚Äö√Ñ√¨ A university education can be important for your child's future, but it's also very expensive. A good idea is to start saving early, putting some money aside every month.¬¨‚Ć Who knows how much it may cost by the time your child is at University age, but by saving a little now it can go towards the expense.
• Teach your children money management ‚Äö√Ñ√¨ Start your children off on the right financial footing by teaching them how to save and manage their money. Understanding this will help them steer clear of debt problems in later life and ensure that their debt management is well organised.¬¨‚Ć
• Frugal fun ‚Äö√Ñ√¨ Keeping your children entertained can also be a drain on your finances, which you may find can't keep up with all the trips, days out and holidays. Try to find cheap or even free alternatives in your local area, such as bike riding or child-friendly museums with no admission fees.
• Hand-me-downs ‚Äö√Ñ√¨ Don't turn your nose up at second hand stuff for your baby. Young children grow out of things incredibly quickly, meaning you have to buy more and more to keep up. Take advantage of hand-me-down offers from friends and family; it can be a lot cheaper.