Halloween may not have arrived yet – but for many of us, our financial gremlins sit on our shoulders the whole year round. Whether this is in the form of debt that you just can't shift, being trapped in your overdraft, or sitting on savings that have gone stale, getting back in control can sometimes feel impossible.
However, with a bit of organisation and financial know-how you can say good riddance to your gremlins for good. Here are our top five tips.
1. Face up to your credit score
Few of us are able to say we have a totally unblemished financial past. However, if and when it catches up with you, it can have serious impact on your financial freedom and choices.
If you have previously been rejected for a loan, credit card or mortgage for example, then chances are you have a low credit score – something that lenders look at when assessing whether you are a borrower they will accept or not. Previous mis-management of debt such as late or missed payments is the major culprit. However, there are numerous other things that can also have a negative impact.
For example you may not have registered on the electoral role at your current address or perhaps you got married and have different borrowing in different name, so good management of your finances cannot be traced back to you. Fortunately, these things can be easily corrected but what isn't as easy is repairing the damage caused by previous irresponsible lending.
But even this needn't be a financial gremlin. The first step to take is to face up to the contents of your credit report in the cold light of day. You can either apply for a one-off copy of your statutory report for a fee of £2 or get a more in-depth version that gives you constant online access to the information in return for a given monthly fee.
MoneySupermarket's credit report channel lists the best offerings from a raft of different credit reference agencies (which hold your report but do not determine its contents).
Once you can see the damage, the good news is there are ways in which you can start to re-build your score. One is by using a credit card specifically designed for people with low credit scores to prove that you can pay back money responsibly and on time.
The Aqua reward card for example, will allow you to borrow cash even if you don't have a good credit rating, and comes with the added bonus that you will receive 3% cashback on all purchases. You can expect a small credit limit and a huge representative APR of 34.9% (variable) but this just reflects the risk the perceived added risk lenders are taking. And, if you pay your balance off every month, which is the only way to repair your credit score, you will avoid this interest anyway.
There's a number of cards similar to this on the market so check out MoneySupermarket's bad credit credit card channel to see what other options you have.
For more on digging yourself out of bad credit, check out Melanie Wright's article 'Tricks to improve your credit score.'
2. Tackle your credit card debt
If you choose to ignore it, credit card debt is one gremlin that really won't go away. The very nature of credit cards means that if they are not used carefully, the interest charged – which averages at 17.32% annually according to figures – can spiral out of control, and it can be hard to get your head back above water.
If this is the case for you, it's time to take action.
If you don't have the cash to clear your debt – and even if you do but would prefer to keep hold of it – consider applying for a balance transfer credit card with a long interest-free period. This would give you some breathing space and allow you to work out a suitable repayment plan over the term.
The market leader at the moment is Barclaycard Platinum with extended balance transfer. This offers a very generous 23 months interest free, meaning you would have nearly two years to clear your debt. Once this period ends, the representative APR (annual percentage rate) is a hefty 17.9% (variable) so make sure you pay off the balance if you don't want to end up back at square one.
Other options include the similarly named Barclaycard Platinum with balance transfer and the Tesco Clubcard credit card for balance transfers. Both offer a slightly lower 22 months interest free and charge representative APRs of 17.9% (variable) and 16.9% (variable) respectively.
3. Don't let savings fester
We may have seen savings rates plummet recently, but that's no reason to be apathetic. If you have stashed your cash in an easy access account with a bonus period that has run out, you must take action now.
If you don't want to miss out on the best rates, then you'll have to go for another account with a bonus. The Allied Irish Bank (GB) Savings Direct Easy Access Reward Account Issue 2 offers a competitive interest rate of 2.80%AER (annual equivalent rate) which is made up of two elements;
1.50% is a variable rate which can change at any time, while 1.30% is a 'reward' rate – which you will only receive if you make no more than four withdrawals in a year. You can open the account with just £1.
If, however, you want more flexibility, you may prefer to consider the Derbyshire Building Society NetSaver Issue 6. This has a variable rate of 2.75% AER and includes a bonus of 1.75% which is fixed until February 2014. After this time you would need to move your money as the rate plummets to 1.00%.
However, you will need an opening balance of at least £1,000 for this account, so it won't be for everyone. You can compare more savings accounts at MoneySupermarket's savings channel.
4. Climb your way out of your overdraft
You are sure that in the distant past, long ago, you had a monthly salary. But somewhere along the line, your overdraft trundled in, swallowed it up and made sure that you would never see any (or very little of it) ever again.
Being stuck in your overdraft is a vicious cycle and the deeper you go, the harder it becomes to claw your way out. Unfortunately, it is only by being strict with yourself that will change things.
Call your bank before your next payday and request for your overdraft to be reduced. Start with a small and manageable amount and gradually build up so that you are seeing more of your salary and less of your overdraft. But be extra careful not to go over your new lower limit as unauthorised borrowing comes with sky-high interest rates as well as penalty charges.
If you can't live without your overdraft then check the rates your bank is charging for the privilege. It may be worth switching to a different current account. For example, First Direct's 1st Account doesn't charge any interest on overdrafts up to £250, and the Co-operative Bank Current Account Plus comes with a fee-free £200 overdraft. To compare these and other current accounts visit MoneySupermarket's current account channel.
5. Pay more than the minimum into your pension – and don't opt out!
If you always put off paying into a pension because it seems like the last of your priorities, the job could have been taken out of your hands anyway. October 1, 2012 marked the start of the government's auto-enrolment roll-out.
This means that companies are now going to have to start enrolling their employees in a company pension – and if you don't want to be part of it, you have to actively opt out.
Initially, it is only staff at large companies (employing more than 120,000 people) who will be affected. Smaller companies will become involved over the next five years.
The minimum requirement you have to pay in initially is only 1% of your salary which your employer will match but, where possible, you should try to pay in more than this. Maximum employee contributions are currently 4% (up to a limit of £42,475 in the current tax year) with 3% form the employer and topped up with 1% in tax relief.
While you will have to make a point of doing it, you may be tempted to 'opt out' altogether if you feel that paying into a pension is a further salary outgoing you could do without. However, doing so could mean putting yourself at risk of being financially vulnerable in your old age.
Remember you are in a position to ensure you are comfortable in retirement, so should take the opportunity while you can.