Four debt management mistakes to avoid this January

Every time the calendar switches and we are greeted with a brand new January, attention seems to turn very quickly from festivities and over-indulgence to depression and a feeling of crashing very heavily back down to earth.

In fact, every year we seem to be bombarded by half-hearted surveys carried out by so-called experts telling us that January is the most depressing month of the year. One of the most prominent reasons for this may well be that over-indulgence does not simply apply to our health, but also out finances.

It goes without saying that anyone with the slightest bit of sense will have a budget that they try their very best to stick to over the Christmas period, but inevitably, sometimes it just doesn't work out like that.

As a result, many people find themselves entering the new year in decidedly unwelcome fashion, with a huge pile of debt. But it doesn't have to be all doom and gloom. Every year. thousands of people in the UK make the best of debt management plans and achieve the ultimate goal of getting back into the black.

This is why it is important to ensure there is no chance of you falling foul of any unnecessary pitfalls when monitoring your personal finance. With that in mind, the following are four common mistakes that many people fall into when borrowing and paying off debts.

Taking out a loan without a plan

In some cases, resorting to borrowing can unnecessarily arise because of the pressure that comes from the hoards of adverts we are subjected to on a daily basis. But in other instances, it is a manageable method of giving a person a short, sharp burst of capital to get them through. Occasionally, this start-up cash could even plant the seeds for a multi-million pound business.

That being said, it is clear that loans must only be turned to when the borrower has detailed repayment plan in place, as well as a strict and itemised budget regarding how the money will be used.

Carefully monitor bills and statements

We live in a world where connectivity is greater than it has ever been before. Where we used to have to wait until the next morning for the previous day's news, or rely on correspondence via post, it's all now available to us at the click of a button.

This means there can be no excuses for avoiding billing schedules or band statements. It might sound like an obvious approach to take, but ignorance is one of the main reasons for debt spiralling out of control. It never pays to sweep issues under the carpet.

Keep borrowing simple

It might feel like weight off your shoulders when your bank account suddenly grows because of the receipt of a loan, but remember, this is really just marker to tell you that your are now in debt. At some point in time, the full amount – plus interest – will have to be repaid.

This is why it is so dangerous to become too entwined in varying schemes that are provided by different lenders. These are usually designed to offer a one-off solution to a financial issue, which means mixing them can be just about damaging as the over-indulgence that happened at the office party over Christmas.

Borrowing to pay off borrowing will only see interest rates become overbearing, so if you cannot viably pay off the first loan you take out within the allotted time, it would be best not to take it out at all.

Don't take your eye off your taxes

Once the turn of the year comes around, the April date for the beginning of the new tax year begins to hurtle towards us, and many may even have a compulsory return to fill out by the end of January.

This means that any possible discrepancies that you even suspect are showing up with your taxes need to be immediately resolved. Perhaps you've taken on a second part time job or recently started a family, these are both factors that could alter a person's tax code.

Any rebates that might be coming your way, or indeed underpayments that could be sussed out need to be taken account for, or this very quickly turn into debt. The smart ones are those who get it all sorted months in advance.