Money Makeover - Give your Personal Finances a Facelift

Unless you're an accountant, managing personal finances is something most of us would rather leave to a rainy day. Many of us are guilty of overspending, and tackling the problem head on can sometimes seem like a depressing prospect. However, it doesn't have to be that way. Sort out your finances now and you could actually claw back enough cash to start saving again.

Step 1: Budget

It's important to draw up a budget. This involves calculating your income and outgoings. Keep a diary of every penny you spend. Be honest and include everything; it's often the small expenses that add up.

If you're spending more money than you earn, some cutbacks will be necessary. Try to prioritise between essential purchases and luxury spends. Could you live without that cheeky pint after work or over-priced designer dress?

When budgeting, aim to plan for the whole year rather than just month by month. Don't forget occasional items, such as birthday and Christmas gifts, and remember to include payments such as road tax and car insurance.

Step 2: Dig yourself out of debt

Whether it's a mortgage repayment or mounting credit card balance, many of us are in some sort of debt.

You might like to think about consolidating your debts - for example converting high-interest credit card balances into a cheap loan. Alternatively, you could compare credit cards and transfer your debt to plastic with a lower interest rate.

Online banking is a good way of keeping track of day-to-day spending and managing money in/money out - which could help you avoid any infuriating bank charges.

If you're having difficulty meeting repayments, contact your debtors to see if you can agree on a realistic repayment scheme.

Find out more about the other steps of your money makeover at www.confused.com/savings