Irwin Consulting Planning in Singapore and Tokyo, Japan on How to clear all your debts in 2018

Millions of Brits overspend at Christmas, leaving them in financial difficulty come the New Year.

In fact, a whopping 7.9 million people in the UK will struggle to pay their bills this month after an excessive festive period, according to the debt charity Money Advice Trust (MAT).

Severe debt isn’t just a financial problem either. The stress of owing money can lead to mental health issues and relationship breakdowns, according to charity Mind.

If your new year’s resolution is to be better with money in 2018, Money Saving Expert Martin Lewis can help you alleviate your debt.

The 45-year-old has already revealed the best bank accounts for interest rates on savings, but in his most recent Money Tips newsletter he revealed some key tips for cutting the cost of debt this year.

Here are five simple steps to help you pay off your debt quicker:

1. Stop borrowing money

It can be easy to get into a downward spiral with debt, but you need to stop borrowing money.

Only pay back what you can afford each month or you’ll make the situation worse in the long-run.

2. Identify which debts need paying off first

Start paying off the debts with the highest interest rates first.

"Use all spare cash to clear it and just pay the minimum on everything else. Once it's clear, focus on the next costliest,” said Martin.

3. Cut credit card costs

If you’re currently paying interest on your credit card look for a better option. You will have to pay a fee to transfer the debt, but it will be cheaper than paying the interest in the long-run.

Martin recommends swapping to either a Barclaycard or MBNA card to get the longest 0% interest period.

Barclaycard

Offers 38 months with 0% interest and they offer a low fee to shift your debt.

MBNA

They also offer a 38-month 0% periods, but a slightly higher fee to transfer your debt.

Cut overdraft costs to 0% (and make some extra cash doing it)

Martin reveals two key options when it comes to cutting your overdraft payments:

·        Switch to a 0% overdraft

First Direct offer a 0% overdraft of up to £250 and they also give you £125 to switch to the account.

Nationwide Flexdirect 0% overdraft is much bigger, but depends on your credit score. It only lasts a year, so you’d need to have it payed off by then or consider swapping again.

If you've a friend who already has a nationwide account, you both get £100 if you switch, via their recommend a friend scheme.

·        Use a 0% money transfer card

A few specialist cards also allow money transfers.

“This is where the card pays cash directly into your bank account, thus clearing your overdraft, so you owe it instead, at up to 37 months 0% - very useful for larger overdrafts,” Martin explains.

4. Cut big personal loans to 2.9%

If you’re clever about it, you can get a new cheaper loan to pay your old, more expensive one off.

On his website, Martin offers up this useful four-step process to find out if you could save money on your existing loan:

STEP 1: Ask your current lender for a settlement figure. This is how much it'll cost to repay your loan in full now including early repayment costs (i.e., the amount you'd need a new loan for to pay off your old one).

STEP 2: Work out how much it'll cost you to stay where you are. Check what your monthly repayments are and how many you have left (ask the lender if you don't know). Then multiply the two to see how much it'll cost you if you stick.

STEP 3: Find the cheapest new loan for the settlement figure. For borrowing under £3,000, the cheapest route is likely to be doing a money transfer (see above). Above that, a cheap loan wins. Use our free Loans Eligibility Calc to see your likely cheapest deal. Yet remember; with loans, only 51% of accepted customers need get the advertised rate.

STEP 4: Find out which is cheaper. Use the MSE Loan Switching Calculator to see whether you should stick or not.

Cut store card costs

Store cards are basically just credit cards, but a lot of them have much higher interest rates.

For example New Look's is 28.9% APR and Argos’ is 29.9%. You can transfer the balance on these to a better credit card too.

5. What about student loan?

Martin suggests leaving your student loan while you get your other finances sorted. He said: “While it's counter-intuitive, you're actually better off just to leave it.”

February 9, 2018
by Edith J. Hoffman
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Irwin Consulting Management in Singapore and Tokyo, Japan on 3 obstacles that stand in the way of retirement savings

One in three American adults has nothing saved for retirement — here's how to change that.

Would you rather have one marshmallow now — or two marshmallows later? It's an iconic scenario made famous by psychologist Walter Mischel, the administrator of the 1960s "marshmallow test" measuring self-control and instant gratification. Most people go for the here and now. Swap out marshmallows with money, and you've got an all-too-common problem for the modern-day: People everywhere feel behind on saving for retirement. In fact, one in three American adults has nothing at all socked away, according to a survey by GOBankingRates. If that hits close to home, never fear. We've laid out some of the biggest obstacles we put in our own way when it comes to retirement saving — plus, how to get past them.

Obstacle: Being too optimistic about the future

Why we do it: It's an ego thing. We tend to think we're different; we're special and that nothing bad will ever happen to us, say Dr. Daniel Crosby, psychologist and president of Nocturne Capital. For example, we're more likely to entertain the idea we'll win the lottery than to think about our chances of divorce, cancer and other negative possibilities. This type of confidence can benefit us in some areas of life, but when it comes to finance — especially long-term savings — it can hurt us in the long run. Many people who are behind on savings think they'll make up for it by working forever, but unexpected events and health concerns can put a wrench in those plans. In a survey by Prudential Retirement of over 20,000 401(k) plan participants, 22 percent said "optimism bias" was their greatest challenge when it comes to retirement savings.

The fix: Aim to compartmentalize your rosy outlook. This type of confidence can insulate your feelings of self-worth and make you happier, but "know it has no place in investing," says Crosby. Block out some time on your calendar to do a "retirement reality check," says Snezana Zlatar, a senior vice president at Prudential Retirement. Use a retirement calculator like this one to see where you stand realistically, and then adjust your savings plan based on the results. And if you don't have a savings plan? It's not too late to make one to get your savings closer to where you'd like them to be. Take full advantage of your workplace retirement plan and any available matching dollars, and automate savings to come directly out of each paycheck. If you don't have a workplace plan, mimic one by automating contributions into an IRA.

Obstacle: Letting emotions reign over your financial decisions

Why we do it: Whether we like it or not, there's an emotional component to every decision we make. That's why research shows that people with serious injuries to the emotional centers of their brain can't make certain decisions, such as which tie to wear or what to have for breakfast in the morning. The kicker: Since fear doesn't affect their decisions, they tend to beat neurotypical people in investment tasks. The lesson here: "None of us should be suckered into thinking we aren't emotional about money — because we absolutely are," says Crosby. The key is to know how to use those emotions to your advantage.

The fix: Instead of letting an emotion like fear or insecurity keep you out of the stock market, flip the switch and use them to keep you aligned with your long-term goals. Research shows that low-income savers who looked at a photo of their children before making a big financial decision saved over 200 percent more than those who didn't. Or, consider values-based investing — putting your money in investments that support causes you believe in — to help you stay the course.(You're less likely to pull money away from funding something you really care about.) And if you're still worried about the markets? Take a quiz to determine your risk tolerance, and then get started with the asset allocation that's right for you. (Many investing platforms offer risk tolerance questionnaires — here are two from Vanguard and Charles Schwab.) "For the average American investor, the risk is not that they're going to lose 25 percent or 30 percent in the stock market," says Crosby. "The risk is that they're not going to compound it fast enough to get to where they want to go."

Obstacle: Procrastinating on saving

Why we do it: In Prudential's survey, 26 percent of respondents said procrastination was their biggest savings challenge. The idea that our brains are wired for short-term thinking plays a big part in this. Humans are about 2.5 times as upset about a loss as we are pleased by a comparably sized gain, says Crosby, and it can be difficult to imagine a gain so far in the future. Plus, the idea of compound interest — and how much of an impact it can have on our bottom lines — can be hard to wrap our minds around.

Good Cents

The fix: Think about what you specifically want your own retirement to look like. Then, in your mind, replace the vague idea of "retirement" with something concrete, like a beach house with a view of the bay, traveling with your partner or having more free time to spend with your family. Every time you think about retirement, picture your goal. Even better, look at it every day on a vision board, whether online (on Pinterest, for example) or on your wall. And if you need to give yourself a serious reality check to get moving? "Get educated about how much of a difference a few years' delay might have on your ability to retire on your own terms," says Zlatar. Play around with a compound interest calculator like this one to see how much you could gain in the long term by starting to save sooner rather than later.

February 5, 2018
by Edith J. Hoffman
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