New Year’s resolutions tend to focus on making plans to improve general wellbeing or kickstarting fitness regimes, however, people are increasingly recognising the need for financial resolutions too.
With January being all about new beginnings and fresh starts, it’s the perfect time to tackle your finances head on and start to introduce positive changes for the year ahead.
So, for those looking to have money makeover in 2022, Sally Conway, Head of Consumer Communications at Shawbrook Bank Personal Loans, shares her five top tips to get the New Year off to a flying start.
Be realistic with your budget
It’s all well and good to set financial goals for the year – but if they aren’t realistic, it’s difficult to achieve them. That’s why it’s important to firstly consider how you are going to keep up the momentum to stay on top of your finances throughout the year.
Understanding your spending habits is a good place to start. Compile a list of your fixed monthly outgoings, which could include anything from your bills to your Netflix subscription. From this, you can work out a budget and know exactly how much you have left each month to either spend or put into a savings account to help achieve your financial goals.
It may be more manageable to allocate a saving goal every quarter, with smaller financial targets to meet every three months. To help, consider using a budgeting spreadsheet or a money tracking app. Some banks provide useful online tools to keep tabs on your spending, so it’s worth seeing what your bank offers.
New year, new savings
Many use the start of the year as a time of self-reflection, which could also apply to both your spending and saving habits.
If you get a spare moment in the downtime between Christmas and New Year, try to review your saving or spending patterns and ask yourself what did and didn’t work in 2021 to consider how you can adapt your approach in the New Year.
If you had a savings goal for 2021, you may want to check whether you achieved this - and if not - why not and what could you have done differently?
As a general rule, you might want to adopt the 50-30-20 model. This suggests you spend 50% of your income on essentials, save 20% and leave 30% of your income for other purchases.1 Or you could set yourself a savings challenge for the New Year.
To show your commitment to reaching your saving goals, why not create a ‘savings pay day’ pot every month. That means transferring a percentage of your total monthly salary straight into savings on the same day each month – treating it as a pay day to help meet your targets.
Alternatively, you could try the ‘365-day challenge’ which encourages you to save an amount of money each and every day of the year. For example, if you started at 1p on day one and added a penny to the previous day’s amount until you built up to £3.65 by the end of the year. That could amount to £667.95 in your savings pot by the end of the year – or far more depending on the value you choose to start at.
Switch to save
When you have lots of different bills and direct debits throughout the year, it can be difficult to keep an eye out for a better deal.
When creating your budget, one healthy way to start the New Year is to review these monthly outgoings. With hindsight of 2021, it might be that you’re able to cancel some of the outgoings that you no longer use or get value from.
As part of this, you may also want to review your household bills to see if switching to a different provider could help cut costs. There are plenty of different broadband, energy and insurance companies offering competitive rates, so it’s worth checking out if you can secure a better deal elsewhere.
It’s easy to procrastinate reviewing subscriptions and packages, but the savings made when you cut or amend expenses can quickly add up.
Don’t forget debts
Managing your debt, however big or small, is essential when setting your financial goals for 2022. Reducing or avoiding adding to any existing debt is something that should be made a priority when reviewing your finances.
Prioritising is difficult when everything seems urgent. But it’s crucial to keep on top of your existing debts, like a credit card or personal loan, even if the balances are low.
And if you do need to take out more credit, make sure you can make the required repayments and understand how much you’ll pay back and when. It’s particularly important to read your terms and conditions carefully and to do your research to help you choose a product that’s best suited to you and your situation.
Set some #goals
New year, new you right? It’s a great time to look to the year ahead and work out your main goals for 2022. By figuring out your priorities, it can help you to decide the best way to get the most out of your budget.
For your financial goals, do you want to save more and spend less? Do you want to clear your debt or improve your credit score? What is important for you and your situation?
In 2022, what do you want to achieve? Are you considering buying a new car, doing some home improvements or planning a wedding? And what can you realistically afford to do?
Working out your goals and budget can help you to understand your finances better and plan out the best way forward. Once you’ve set out your New Year saving goals, making your money work harder for you and being savvy with how you get there might help you to achieve them even quicker. Whether that’s setting up a savings account, changing your spending habits or even borrowing to get that new kitchen you’ve always wanted, there’s plenty of options to help you to reach your goals.
Making well-informed money choices as you enter the New Year can help make your money go further, and taking small steps to refresh your finances can help you reach your saving goals sooner.