This Halloween don’t hide behind the sofa to get away from your money problems. It’s time to face your financial horrors head on! We delve into the most frightening money problems and show how you can take simple steps to solve them.

• Bailiffs at the door
• Running out of money before payday
• Wasting £100s on interest payments
• Having no retirement fund
• Falling too ill to work
• Having your identity stolen

Bailiffs at the door

The ogres of the money world, bailiffs, are one of the scariest financial horrors… at least they seem like it. But if the burly men are banging on your door, keep calm. And make sure you know your rights.

Crucially, you do NOT have to let them in and they are NOT allowed to force their way into your property (although they can use an open window or unlocked door) unless one of these three things is true:

• They have previously gained entry to your property
• They are county court bailiffs, entering commercial property (but only if there’s no living accommodation attached and they have special permission)
• They are collecting unpaid fines, income tax or VAT and they have permission from the court

If they do get in, there are also exceptions as to what they can legally take from your home – they cannot take essentials such as clothing, bedding and furniture or anything belonging to someone other than the person named on their warrant. Don’t be scared by idle threats either. Despite what some bailiffs say, you CANNOT go to prison if you don’t co-operate with them and they are forbidden from threatening you and CANNOT use any kind of violence towards you. Contact the Office of Fair Trading if they overstep the mark or the police if they threaten you physically.

The best way to deal with bailiffs, however, is to sort out the problem before they come a-knocking. If you receive any notification that a bailiff is going to come round, you need to talk to your creditors. One of the first things you should do is get some free advice from your local Citizen’s Advice Bureau (CAB) or another debt charity (see our list of contacts below). They may be able to help you make a court application to stop the bailiff, or negotiate with them on your behalf.

We have a whole article on dealing with bailiffs here so check it out if you are being harrassed.

Running out of money before payday

If you always spend the last few weeks of every month counting down the days until payday, it’s time to take action.

1. Do a budget. If you create (and stick to!) a clear budget and cut out unnecessary costs, you will turn your life around. It’s that radical. You can use a free tool such as our budget calculator then get lots of other tips on what to do if you’re outgoings exceed your incomings in our guide to making a budget. You can even do it on the back of an envelope – just do two columns, one with your monthly incomings, the other with your monthly essential outgoings. Take the outgoings from the incomings and that will show you how much spare cash you have to play with each month.
2. Make extra cash. If you spend more than you earn, start to earn more to spend! We have loads of ideas on how you can make money in our Make Money section. Everything from making a few quid here and there to bringing in thousands on the side.
3. Don’t go for a payday loan. Payday loans are a nasty type of short-term lending. They can charge around 2,000% just to lend you a few quid until payday as we show in our payday loans article. If you often just need some cash to tide you over, you’re much better off joining a Credit Union as they are willing to give small, short-term loans in a way that high street banks usually are not. We’ve got more info in our piece on how to get a cheaper loan.
4. Think about what’s really important and stick to that. Sounds a bit philosophical but research by short-term loans companies has shown that people who get into payday panic often ‘need’ the money for inessentials like clothes, entertainment and tickets to events. We need to learn to do without these things until we generally have the money so that we don’t waste precious cash on high interest rates. Here’s the top 10 list of spending ‘needs’ given by customers to loans company Ferratum:

Wasting £100s on interest payments

One sure-fire way to get into money troubles is to waste money paying interest on debt. When you borrow money you are really just ‘renting’ it – so the higher the rent (interest rate) and the longer you rent it for, the more money you will pay overall.

If you only pay off the minimum amount each month, you end up paying far more interest on the money you’ve borrowed. For example:

£1,000 borrowed at 18.13% APR. According to Moneysupermarket, someone paying back the monthly minimum would need 17 years to repay their debt and would pay an eye-watering £1,113 in interest – more than double the original sum borrowed!

If you do have an outstanding balance on your card try shifting that debt onto a card offering a promotional 0% interest deal on balance transfers – this will give you time to clear your debt without the added pressure of further interest charges. Find out about the current balance transfer cards here.

Getting the best credit card or cheapest loan is just the beginning though. Being debt free is about changing the way you understand money and making small adjustments which have a big impact on your financial life.

We take you every step of the way with our FREE series of ‘Get Out of Debt’ emails.   Sign up here and get your debt-free action plan underway today! It costs nothing and you can unsubscribe at any time.

Having no retirement fund

We may all dream of an early retirement complete with long holidays, relaxing times with friends and exciting new ventures – but this is little more than a pipedream if you’re relying on the state pension. You need to start saving on your own and as early as possible, or you could face a much longer working life than you expected (or even worse, you could retire with little or no money to live on).

You don’t have to have a pension to fund your fabulous retirement. It’s just one of the many types of investments you could make to create a decent savings pot for yourself.

Here are the various investment options for you to consider to fund your glamorous and enjoyable retirement:

• Stocks and shares ISAs. Long-term shares do better than savings and many other investments. Short-term they are volatile (and so can seem worrying) but for your retirement – if that’s at least 10 years away – you should be thinking about long-term gains anyway. We like index-tracking funds because they are cheap and they work better than funds managed by city boys.
• Property. Old-fashioned bricks and mortar is also a good long-term bet, although the recent housing crisis (outside of London) should remind you that it can be risky. It can also be costly to keep it repaired, rented and decorated every year. However, there is likely to be continuous pressure on the housing stock going forward, so if you’re looking to the long-term, it’s worth adding property to your portfolio.
• Stakeholder pensions. These are cheap and pretty straightforward (read about them in our stakeholder pension article). They are simple, cost-effective and available to anyone – even your kids.
• SIPPs. If you are a confident investor, a SIPP may be better for you as you can decide what you invest in rather than relying on fund managers to waste your money for you. We have an article on SIPPS here and you can download the free Hargreaves Lansdown guide to SIPPs.

Even if you can’t put away big payments into investments right now, every little helps and the magic of compound interest means that anything you save now will have a long time to grow if you start young. However, if you’re in your 30s and 40s and still haven’t started saving towards your retirement there’s still time to make a huge difference – see how to save at any age in our retirement guide.

And, remember that there are also lots of ways to make extra cash at any age, so read our money-makers for the over-60s piece for some inspiration!

Becoming too ill to work

If you get ill or injured and can’t work, sick pay will only cover you for up to 28 weeks. If you need to take an extended break from work and haven’t got income protection in place, you could end up in serious debt, or even losing the roof over your head.

Here’s how you deal with it:

• The best way to prevent this is by building up a savings safety net to cover you for at least three months if you lost your income. Read all about it in this article. This pot will keep you afloat and the bills paid until you’re back at work so that you don’t end up in a dire situation. For pointers on topping up your income (even if you’re not working) read this guide on ways to save when you don’t have any money.
• Alternatively, get an income protection policy which pays a tax-free monthly sum until you get back on your feet, or reach retirement age. (Do remember this isn’t designed to protect you if you lose your job – just if you become too ill to work). It can be a bit complicated, so read our article about getting the right policy here.

Having your identity stolen

Identity theft is on the rise - and if a stranger gets hold of your personal data you could lose thousands of pounds. Worryingly, it’s a fast-growing growing crime because it’s so easy – fraudsters only need a few key details to steal your identity and run up a massive bill or apply for credit in your name.

Here’s how you protect yourself from I.D. theft:

• You should instead check your credit report regularly to ensure that fraud hasn’t been committed. You can get a free Creditexpert trial with Experian and find other ways to stay safe online here.
• Make sure you shred all receipts, documents and statements that you don’t need.
• If you move house use the Royal Mail redirection service and get someone to collect your post if you go on holiday.
• Social networking websites such as Facebook are one of the newest threats so don’t post details such as your email address, date of birth or schools to anyone other than those you trust implicitly – as these are the types of things banks ask for security questions!
• Don’t bother with I.D. fraud insurance, as your bank or credit card provider will cover the cost of losses as long as you weren’t negligent (and in any case, these policies only cover the cost of fixing the damage – not the actual financial losses you might suffer as a result of fraud).

Useful Links

• Get free help from charities Citizensadvice.org.uk, Consumer Credit Counselling Service (CCCS) and Nationaldebtline.co.uk
• Compare the best Income Protection policies
• Get a free Creditexpert trial
• Download the free Hargreaves Lansdown guide to SIPPs here
  
• Tell us about your worst financial horror on our Facebook page