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Get back in the black

It's hard to avoid the financial fallout of the past few weeks, and a peek at your bank balance can be a bruising experience. Susan Hayes, an economist with The InvestR Centre, advocates a clear-headed approach to sorting out your finances.

Step 1: Set your SatNav for 2010

Susan says: "Set out a destination for your money, the same way you do when you start a journey. Maybe you want to be debt free, have €X,000 in the bank, or a lump sum paid off the mortgage by the end of 2010 -- whatever it is, write it down.

"Draw up a spending budget detailing everything from the mortgage payment to your mobile phone expense. Use the downloadable budget sheets on www.mabs.ie to help with this. Compare this to your (and your partner's) income and identify what is left over. This is the vehicle that will bring you to your destination. So let's start the engine..."

Step 2: Look at ALL your financial products and read the fine print

Susan says: "There are various ways to cut household and discretionary costs, yet people seldom look at the costs of financial products.

"Examine your credit card -- what interest rate are you paying? Consider switching to another card with a "0pc" offer or use a Laser card instead if you have the money in the bank.

"Visit www.itsyourmoney.ie where you will find a 'jargon buster' and various cost comparisons on credit cards, bank accounts, insurance, mortgages, etc. Do you have insurance policies that you no longer need?

"Finally, look at your investments and particularly unit-linked funds, as these products can be full of costs. Is your money earning for you? If not, consider other options.

Step 3: Do you want a guaranteed return on your money?

Susan says: "Loans are throttling the disposable income of many Irish households.

"If you are just making the minimum payments on debt, including credit cards, then you will pay thousands in 'dead money'. Consider putting some savings towards paying off the card, then cut up the card.

"If you simply don't have the money to pay off expensive debt, think about consolidating your loans. This suggestion comes with two warnings: a) this should not be a ticket to go and get new loans, and; b) this technique just distributes a heavy burden over a longer period.

"In the long run -- particularly if you put money on to your mortgage -- this option can cost you more. However, you can increase your contribution when the good times return. Finally, steer clean of loan sharks.

Step 4: Increase your income this year

Susan says: "Millions stay in the Government's coffers that should be distributed as tax allowances. You can get tax back for medical bills, bin/water charges, membership of a trade union etc.

"People are often intimidated by even the word 'tax' and hence don't examine their entitlements. Call into your local tax office and talk to an agent about what allowances are available to you and how to get them.

"Alternatively, you can pay a small fee for this service through www.taxback.com.

"Other ways to bring in more money include selling things you don't want on www.ebay.ie, or setting up a minimal-cost online business promoting information products, see www.clickbank.com for ideas."

Step 5: Look into your pension

Susan says: "Some day you will retire, and when you do, it would be much nicer to enjoy it without financial strain. The earlier you prepare for this day, the more likely this scenario will emerge. For information on the various types of pensions, visit www.pensionsboard.ie.

"It is important to note that contributions paid to a pension scheme will benefit from income-tax relief at your highest rate of tax.

"An example on the aforementioned website explains: 'If you contribute €100 per week to your pension and you pay tax at the higher rate (ie 41pc), the net cost to you works out at €59 per week."