To improve finances, create a better mindset

By Marianne Curphey

Even if you start out with the best intentions, the festive season can be full of unexpected expenses that can tip you into the red. If you are feeling down about your debts or the over-spend on your credit card from the last few months, don't despair. You can use your feelings of debt regret to start 2014 with a new attitude toward money management. With the help of some experts, we have drawn up a plan to help you deal with debt regret in the New Year.

1. Get motivated
"Take a cold, hard look at where you are now," says Philip Pearson, independent financial adviser with P&P Invest and an expert on family financial planning. "You need to be honest with yourself and see the figures written in front of you so that they become a reality."debt-regret

Make a list of all your debt and stick it somewhere you'll see it daily, like your mirror. Then, choose a goal. For instance, you can say, "I want my debt to be cut in half in six months' time." Write your goal and the date you hope to have achieved it and pin it up next to your starting amount.

"Between the two pieces of paper, put another piece of paper joining them which reads simply: ‘It's up to me,'" suggests Pearson. "This is the starting point for any form of action -- you need to recognise that it is up to you."

2. Break old habits
Old habits can become like old train tracks: they take you to the same places over and over again, says Becky Wright, life coach with New Leaf Life Design Counselling and Coaching.

"To break out means to find exit points," she says. "Think about what your own cycle of behaviour is and start to look at what point in the cycle you could exit from."

Have you always thought of yourself as "bad with money" or told yourself that you will "always be in debt"? Now is the time to turn those thoughts to more positives affirmations.

3: Visualise success
In order to keep going you need to be clear about the benefits of reducing your debts.

Philip Pearson says: "Think about what being debt-free will mean to you. That visualisation is key to success. By writing down where you want to be, you have taken the first step in making it a reality. You need to record it and then to revisit it on a daily basis."

"We often give up because we can't see a way through," agrees Wright. "It really does help to be able to see the light at the end of the tunnel."

4. Create a budget
The most important way to ensure that you are moving toward your goal is to have a budget plan for spending and saving that you stick to.

You might need to keep a spending diary and record each transaction you make -- from your morning coffee and newspaper to your expenditure on cash, direct debits and credit cards. Or, check your bank's website -- many bank sites have a spending tracking tool.

When you have your spending laid out in front of you, you can start to make some choices about where you are going to spend your money and what your priorities are.

4. Find a Buddy
Find someone to whom you are accountable. Tell them what you are going to do, and what you are hoping to achieve. This person can be anyone you trust to hold you to account.

"Tell them each day by text or email what you have done towards reducing your debts," says Pearson.

Yvonne Goodwin, of Yvonne Goodwin Financial Management, suggests challenging yourself and your friends to see who can save the most money on mundane items. "Finance watching is best done in a group, just like weight watching. With support around you, you are less likely to give up," she says.

5. Decide which debts to pay off first
Aside from paying your necessities -- housing, utilities, food, transportation -- you should pay off debts with the highest interest first. The less interest you accumulate, the better. If all your debt has high interest, consider moving some of it to a credit card that offers a no-interest introductory period.

"Check if you can move your debts to a balance transfer card," says Goodwin. "You'll need to do the simple maths to work out if it will cost less."

See related: Balance transfers, used wisely, can help manage debt, Picking a balance transfer card

Published: 7 January 2014