Every year the same tips circulate about how to get your finances in order, but every year they are worth reading. Even if you just follow one tip, it is a step in the right direction.

John Manyike, head of financial education at Old Mutual suggests the following steps to avoid a debt nightmare in January 2012 and beyond.

Face your fears
• Find out where you are now financially by writing down what you earn, owe and spend. In our digital age money can seem unreal, just a swipe here and there and a number o­n an LCD screen. So the simple act of writing down what comes in and what goes out helps to bring you face-to-face with reality.
Fixed expenses
• Start by writing down your fixed expenses or the things that stay the same every month. Typically these are rent, bond repayments and insurance premiums.
Variable Expenses
• Below these, jot down your variable expenses such as food, transport, rates, cellphone and similar costs. Include items such as entertainment and clothing. If you’re paying for these o­n a credit or shopping card, use the statements to help you work out what you spend o­n average per month. Above all be honest. By underestimating these costs you’re o­nly fooling yourself.
Irregular or ad hoc expenses
• Write down your irregular or ad hoc expenses. These are things such as car maintenance, computer repairs, home repairs and so o­n. Try to come up with an average monthly cost. Again, if in doubt, it’s better to slightly overestimate than get caught short.
Add up and adjust
• Now for the really important part: add them all together. If they exceed what you’re earning, you’re already in trouble. And if they’re close, with the rising petrol price and fluctuating interest rates, it could be just a matter of time. Therefore, make the necessary adjustments by reducing spending and setting new budget limits. Do this exercise before you go o­n a holiday to make sure that you can afford it. If you can, set budget limits for the holiday together as a family.

Charge down the debt monster
Tackle the debt monster before you become lenient to the festive spending.
Prioritise
• Start by prioritising your expenses in order of importance. You need to pay a bond or rent, you need transport and you have to eat. When it comes to things like clothing and entertainment, ask yourself whether each expense is really necessary – and if it’s not, try to eliminate or reduce it.
Pay off debt first
• Use whatever money you free up this way to pay off debts. Start with the o­nes that attract the highest interest such as shopping cards and credit cards. Of course this will o­nly work if you don’t rack up a whole lot of new debt.
• You should also speak to your financial advisor. You may be able to reduce your monthly repayments by consolidating some payments such as clothing accounts and other loans. This way you also reduce multiple admin fees. But remember, it is not a good idea to consolidate short-term debt over a long period.

Banish the beast
Emergency fund
• Plan ahead. Set up some sort of emergency fund to deal with unexpected expenses. As a rule of thumb this should be about the equivalent of a month’s salary. You’ll be amazed how much peace-of-mind it will give you.
Start a savings habit
• Next, think about investing some money to reach your financial goals; ideally between 10 – 15% of your net income each month. This is over and above what you should be saving for retirement through your company pension scheme or your own retirement investments. If you’re unsure or need some help working out a financial plan, your financial adviser should be able to help you.
• Once your finances are fully sorted, you can budget a little money each month to congratulate yourself.
• Importantly, empower yourself with knowledge: Old Mutual’s free O­n the Money programme helps you develop planned, clear and specific short, medium and long term visions that are realistic, achievable and inspiring.
• The programme shows how South Africa’s Big Five animals’ habits can help us develop good financial principles