Financial New Year’s Resolutions
5th January 2018
So, it’s a New Year and that means the fun is over, it’s back to work, and time to start the year full of good intentions. For our first blog post of the year, we’ve decided to help you start 2018 with your best foot forward and help you come up with some Financial Resolutions.
The Most Important Advice: Set Yourself Up for Success
The most important thing to remember is that you don’t want to set yourself up for failure. If you start with an impossible plan to save thousands in one year, then you’ll find yourself disillusioned and giving up by February.
It is better to set yourself Resolutions that will change your financial habits in the long term. For example, instead of setting yourself the goal of having a deposit for your first home by January 2019, set yourself the task of improving your monthly saving habits, and set yourself the amount of the deposit as a goal to motivate you. You should allow yourself to achieve this naturally as soon as you can, without time pressures.
The second most important thing to remember is that everyone’s financial situation is different. Don’t let your friends’ financial goals, or family expectations, define what you need. It doesn’t matter if Joe and Jane have started saving for their first home, or if Mr and Mrs Jones just bought a yacht. All that matters is that you’ve started on a more financially healthy path.
With that in mind, here are some achievable Resolution ideas. You definitely can’t achieve all four in one year, but hopefully it can inspire you to find something achievable that you can stick to.
Resolution No. 1: Stretch Your Money Further
The first step to improving your financial health is to work within your current situation to make it as efficient as possible. This, essentially, means budgeting. However, having a budget is not enough. You also have to evaluate your expenditure, and cut and lower costs until your finances are as efficient as possible.
This sounds intense, so you need to remember to set yourself small, achievable aims. A good idea is to find something that you regularly spend money on and then aim to cut or lower it, once you have achieved that, find something else, and repeat. Don’t try to undertake all of them at once.
Some good ideas for achievable goals include:
- Cutting the cost of your weekly shop
- Bringing lunch to work instead of buying it
- Cutting down on your coffee intake, especially if you regularly buy it from a café
- Quitting smoking
- Walking instead of driving or taking public transport
- Switching energy supplier
- Insulating your home for more efficient energy use
- Getting a Smart Meter to keep track of your usage
Learning how to streamline your budget is the single most essential skill for financial health, as it is one you should return to time and time again as your circumstances change. Whether it is a promotion, or a pay rise; a mortgage, or a child – every time your financial situation changes, you can work to stretch your money as far as it can go.
Resolution No. 2: Pay Off Your Debts
Streamlining your finances should, hopefully, free up your money to do other things. Your first priority should be paying off your debts, if you have any. If you are able to pay off significantly more than your minimum payments every month, you could aim to pay off your debts in the same way with the skills from Resolution No. 1, by cutting and lowering your costs and spending all your surplus income on repayment.
It is always a good idea, however, to do some research about debt and other debt solutions, and this should be your first step if you decide your Resolution is to pay off your debts. Even if you are on top of your debts, you may find a faster, less expensive method to repay them.
If you are one of the millions who are struggling to just to pay your minimum payments, don’t worry! There are plenty of debt solutions that could help you manage your debts – and we are here to help you find the best one for you. For more information, click here, or give us a call on 0808 2085 198.
Resolution No. 3: Save For a Financial Emergency
If you have your debts completely under control, the next essential step to financial health is to ensure you are safe from the impact of a future Financial Emergency. The upcoming year could be filled with all manner of events, from maternity leave to a broken boiler, and if you don’t want these events to affect you too seriously, it is a good idea to plan ahead.
Generally, it is advised that you have six months expenditure saved in order to use in a financial emergency. To calculate how much this would be, you first have to figure out how much you spend in a month. This includes food, bills, rent/mortgage, and other essentials for you and your family. For example, spending £1000 a month means you need £6000 in total as your goal.
If you’ve streamlined your budget, then this goal is as simple as putting your surplus income into a savings account every month so that it is separate from your money and you are not tempted to spend it. The more money you are able to put away, the faster you will meet this target.
Remember: these savings have to be very accessible so that they can help you when you need it, so you might not be able to get the best interest rates.
Resolution No. 4: Save For a Project
Once you have your financial safety net sorted, you may have other financial goals that you want to meet. You can continue to save in the same way, if you like. However, longer term goals, such as a deposit on a house or car, may benefit from different savings techniques.
First of all, it is important to understand the role of inflation in savings. Inflation is the rate at which prices increase. As prices increase, the value of money decreases because it is less able to buy the same amount of goods as it could before. This means that sitting on your money for a long period of time can result in your money losing value.
This is where interest rates come in. The higher the interest rates on your savings account, the less your money loses in value, if the interest rate is higher than the inflation rate, you may even make money! However, the higher interest rates often come with conditions, such as limited access to your funds, or they could only be for a limited period of time.
It is important to consider a wide variety of savings options to suit your goal so step one in your Resolution to save for a Project is to do your research. There are many financial products available, so you have to find the best one for your circumstance.
A Step in the Right Direction
There are all kinds of Resolutions you could choose. But, no matter what is best for you, make sure it is achievable, and that you aren’t sacrificing your physical or mental health for financial health. It might seem like a good idea to skip a meal to save money, but you are really just substituting one problem for another. Take it slow, and reward yourself when you do well.