Be careful of overpaying on your mortgage
While clearing your mortgage through overpayments is a good idea if you can afford it, you should think twice if there is any question mark over your job security.
Overpayment could backfire if you hit hard times. This is because most lenders will not allow you to draw against overpayments if you need the cash in an emergency - maybe because of an unexpected job loss.
Move fast if you're remortgaging
Borrowers who need to switch loans in coming months should act now. Fixed and tracker mortgage deals are changing daily and the most competitive rates are strictly limited. Mortgage deals can be reserved for up to six months in some cases. Speak to an independent broker and use website mform.co.uk to research the home loan market. Homeowners worried about their mortgage costs should fix their rate - the longer the better.
If it gets too much, take a holiday
If you are struggling with mortgage payments there are options apart from going into arrears. Ask your lender if you can take a payment holiday for a few months. Or switch from a repayment to interest-only mortgage, or increase the term of your loan. Both options will cut monthly costs.
Let a room
Boost your income by taking in a lodger. Under the Rent a Room scheme, homeowners can let a room with no tax to pay on rental income up to Â£4,250 a year. Visit the taxation section on direct.gov.uk to find out more.
Take out insurance against losing your job
Consider accident, sickness and unemployment insurance, sometimes known as mortgage payment protection insurance. This cover will pay an agreed monthly benefit for up to 12 months, giving you time to get back on your feet if, for example, you lose your job.
Draw up a strict budget and cut out luxuries. Work out how much you can afford to spend and stick to it. Then use extra cash to reduce the most expensive debt first - whatever charges the highest rate of interest, whether on credit cards, overdrafts or personal loans.
IF you have a small mortgage, use it to consolidate unsecured debts if your lender allows this. Though mortgage rates are rising, they are still cheaper than loans on most unsecured debt. As a last resort, ask family if they can help. This could be a better short-term option than borrowing more to manage the debt that you already have.
Citizens Advice provides free guidance that can help you work out your repayments and negotiate with creditors to prevent borrowing spiralling further. This is usually done by arranging for interest charges to be frozen on the basis that you continue paying what you can afford. It can also draw up plans to help you stay out of debt in the future.
Build an emergency savings fund
Once you have cleared any debt, look to build cash savings. An emergency fund could be a lifeline if you lose your job. Financial advisers recommend you have at least three months' salary in cash before investing in equities and other asset classes. Savers should seek the highest rates (see Stats Station, Pages 80 and 81) and use cash Isa allowances to combat the effects of tax and inflation on savings. From next month a maximum of Â£3,600 can be put in a cash Isa every tax year.
Sit tight and bite your lip
SaversS in company pension plans can do little in times of economic crisis except sit tight and hope their scheme is being well managed. A prolonged financial downturn will lead to the closure of more final salary schemes. Where possible it is advisable to make other independent savings and investments to diversify your retirement planning.