New Year, new start to your finances
For many people, the New Year often brings around an opportunity for change. Whilst for some this may mean adjusting a lifestyle or taking up a new hobby, January can also provide a chance to review your financial situation.
In previous years, polls have consistently shown that financial resolutions are nearly always at the top end of the public’s list of things to change.
For example, a recent poll has suggested that the average adult will shell out £4,600 on financial resolutions, including paying off debts and moving house. 11% of people aged under 25, along with 15% of over 55s, want to clear their debts and get back on track financially.
However, 46% of people interviewed were resigned to failure, and had said they didn’t think they’d achieve their financial goals.
New Year’s resolutions can be notoriously difficult to stick by, however, there are a few ways to help make sure you start the year on a positive financial footing.
Look back at your finances before looking forward
Reviewing your spending for the year ahead can be a good way to help prepare for the upcoming financial year. Collecting bills, bank statements, and receipts and thoroughly reviewing them can highlight areas of unnecessary spending. Once you are aware of any financial ‘leaks’, they can be easier to avoid.
Checking your credit report can also give you an indication of your financial situation and may help you to make plans for the future. You can learn more about credit hygiene here.
Evaluate your current situation
After analysing the past year’s spending and income, there may be some changes you can make immediately:
- Reviewing any direct debits or other payments can help you identify any expenditures that could be cut, which may considerably reduce your outgoings.
- Selling unused or unwanted items can be a good way to create an income without making big sacrifices.
- Researching balance transfer credit cards Balance transfer cards can help to consolidate your debts into one manageable payment, potentially at a more favourable interest rate.
- Setting up an emergency fund can help provide stability. An emergency fund can help prevent dipping into other sources of money, such as loans, for unexpected expenditures.
Taking these steps could help you strengthen your financial situation for the upcoming year, make saving easier, and give you confidence for the future.
Successfully planning your finances
The reason many New Year’s resolutions fail is because people set unreasonable goals for themselves. A tendency to think in absolutes – e.g. “I will clear ALL my debt” – can set us up for disappointment. This disappointment then leads to negative feelings which make it even harder to stick to our plan.
Thinking about ‘SMART’ goals can help give direction to your financial aspirations and make those goals more achievable.
- Specific – Rather than pledging to ‘save money’ or ‘reduce debt’, thoroughly analysing finances and targeting specific areas for improvement could boost your chances of reaching your end goal.
- Measurable – Having benchmarks can help you track your progress, letting you make changes if you need to.
- Attainable – Setting a realistic goal can help keep your confidence up as you feel the achievement of getting close to your desired result.
- Relevant – Ensuring your goals are appropriate to what you are trying to achieve can help you avoid wasting time.
- Time Sensitive – If you know when you want to achieve your goal, this can allow you to pace savings and ensure you put the right amount of money aside.
The benefits of budget planning
Drawing up a budget can help you regulate your spending, monitor your income and expenditures, and find areas in which you can save.
- Gathering all the information on your funds can give you a wider perspective on your situation, which means you can organize your incomings and outgoings and draw a sensible plan to keep control of your money.
- Bonus income can be a tempting reason to splurge your money, but it can also be an opportunity to boost your savings. Dividing any bonus money into past debt repayments, future savings, and spending for the present can be a way to ensure that it goes to good use.
- Once your plan is complete, recording every outgoing for the first month under the new budget can offer the opportunity to review and make any adjustments.
Regularly revisiting and updating your savings goals and budget plans can help you keep up with any changes that occur throughout the year.
If you are interested in learning more about your credit history, you can get online access to your credit report with the FREE Equifax Credit Report & Score product, which is free for 30 days and £14.95 a month thereafter.
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