A basic intoduction to financial health

Right now the economy is not doing so great. What that should mean to you is that now is not the time to leave things hanging. Much like me a year ago being physically unfit many of us are financially unfit. This guide (and indeed all of credit crunchies) will be looking at what you need to do to reduce your risks during financial crisis.

The first area to look at is debt. Debt is a liability and ideally you need to reduce it quickly. Right now you may have a job (lucky you) and so you can manage your repayments but should unemployment come looking for you - you need a plan. If you have savings now would be a good time to consider using them to pay off debts. You are likely to be earning between 2% and 4% on most savings but paying 8% to 25% on debts. That means that you are paying more to have their money than they are paying to have yours.

Even if you are in a possition where the interest you earn covers the interest you pay I'm willing to bet it is because you have borrowed less than you have saved. Using a slice of your savings to pay off your borrowings should tip the balance and leave you getting more in interest than you are paying.

Some debts, like mortgages, are a long term project and for these you need to make sure you are paying as little extra as possible. This being a credit crunch that's not going to be easy.

If you have not got any savings then now is not the time to start to imitate a headless chicken. You are going to need to take a good look at your income and then figure out where it is all going. A saving of as little as £10 a week through simple savings could net you as much as £450 a year.

Right now I hope that you are coping well with your borrowing and with your spending habits but the time to trim down is not when disaster strikes but before. Writers on this blog are going to be looking at things like how to spend less on shopping, how to get more bang for your buck (as it were) and even things you can do to not need to spend at all.

So let's just look at the big items at the moment.

Cars - these babies are popular (especially in the USA) and often the "sexy looking car" is the cash guzzling type. You can make a considerable saving just by trading in for a less expensive lower volume mode of transport. You will save on the insurance premium, the fuel costs and (in the UK at least) on the price of road tax.

Also you are likely to walk away with money in your pocket. Put that cash in your savings account and let's move on.

Eating out - we all love to do it and right now socialising at the Billion Dollar Steak House might be normal but if the bottom falls out of your income you need to already have formed less expensive habits. I'm not saying never eat there but I am saying that getting into the habit of home entertaining could leave you considerably more to stash away in that savings account.

Not only does the saved money serve to protect you from instant fall out if your job evaporates but the new habits you have formed will serve to stop you killing your resources on things you can no longer afford.

It might come as a shock but most millionaires are not high flyers but people who treat living well within their means as a religious way of life. In other words if they pull in £25,000 a year they would be looking at a living cost of no more than £19,000 to give then £6,000 to invest in assets. Assets are things that earn you money. Savings bonds, stocks and shares are assets. The house with a huge debt on it - that's a liability just now.

Our aim here is to reduce liabilities.

I'm going to open the floor up to you guys to share you ideas of how you can leave yourself with money to save at the end of the month. Take it away...