2020 has been a challenging year for many. But as we look forward to a hopefully more positive 2021, now is the time to set goals — both financial and otherwise.
Sticking to financial goals set last January will not have been possible for all, with the pandemic affecting people in many different ways.
For some, the pandemic has created new financial challenges with illness or a change in circumstances impacting their finances. For others, lockdown may have provided an opportunity to cut back on spending and make some savings.
Whatever situation you find yourself in, it’s important to be realistic about your goals. The following list of new year financial tips can help you achieve your money resolutions and improve your personal finance skills in 2021 and beyond.
First of all, it’s essential to get familiar with your current finances. The consequences of coronavirus will have changed many of our circumstances.
Understanding how your earnings and spending has changed is key to setting achievable goals. Perhaps you have been able to save while staying home, or maybe you remain uncertain about your next paycheck.
Being organised from the outset will help you figure out how to move forward and achieve your objectives.
This could help you to prioritise the areas that need the most attention — whether that’s analysing what you currently spend your money on, or how much money you put away in your savings pot.
Be sure to make a list of all your regular monthly outgoings, including your entertainment subscriptions and deduct these from your wage. This will give you an idea of how much you have left to work with. For useful tools and resources for budgeting, visit our MoneySure page.
Due to restrictions, many of our habits and routines have changed, so be sure you are not still paying for subscriptions for things you don’t need or use anymore. You can find out more about this in our tips on how to tighten the purse strings.
By taking a closer look at your finances, you could start making those all-important improvements to help you get on track.
Although this sounds simple, avoiding adding to any existing debt should be the golden rule when looking to improve your financial health.
Be mindful of attractive offers. Deals like ‘Buy Now, Pay Later’ can be attractive when shopping but your need to make sure you understand the costs associated and that it’s the right deal for you before committing to any form of finance. Read the terms and conditions very carefully before you make a decision.
If you do need to take out a loan, make sure you can make the required repayments and understand how much you’ll be paying back and when.
With so many uncertainties, many people have been budgeting — some through caution, others through necessity. That’s why we put together a guide on how to stick to a budget when trying to save money.
Long term, it’s a good idea to create a spending plan. Working this out shouldn’t take too long once you’ve got to grips with your finances.
Putting a structure in place, where you can carefully monitor your spending over a manageable period could give you greater control of your finances. Consider each month as you plan.
Assessing your financial situation is critical here. There is no point in creating a budget or spending plan that is setting you up to fail.
Look at how much you’ve got coming in each month and compare this to how much you spend on necessities, such as rent, phone bill, car finance etc. By using the difference, you’ll be able to work out how much disposable income you have. This can help you to break down the different parts of your spending plan.
Planning can also help you to figure out how you can balance your spending throughout the year as you might want to allocate more money in some months than others.
When assessing your financial situation, taking a closer look at your credit score is an ideal next step.
If you already have a good credit history, your goal should be more about maintaining that over the next 12 months. And if your credit score is low, you can consider improving it as one of your new year money resolutions.
Aside from the usual things such as making payments on time and keeping credit utilisation low, there are some relatively easy steps you could take to improve your credit score.
For example, if you haven’t registered on the electoral roll, it’s a good idea to do so. This proves you live at your current address and helps lenders confirm this information, which could then positively reflected in your credit report.
It’s a good idea to regularly check your credit report. You can use providers like Equifax, Experian, ClearScore or TransUnion. For more information on how to improve your credit score read Money Advice Service.
The following two goals can also help to improve your credit score.
Managing debt, however big or small, is essential when it comes to setting your new year financial goals.
You can reduce your debt by meeting your regular repayments and not borrowing more.
If you’re paying for several different loans or credit card debts, consolidating your debt could help to streamline all of your debts into one more manageable monthly payment.
It’s important to consider the best option for you. But if you’re heading into the new year with a long list of things to pay-out each month, it could be something to consider. To find out more, visit our debt consolidation loans page.
Although consolidating debt does not reduce the amount of debt.
It’s important to be mindful that if you do choose a personal loan to consolidation your debts, it’s also possible that you could end paying more in interest, so please read the terms and conditions carefully and shop around for rates before making a final decision. For more information about debt consolidation and the options available to you, read our ultimate guide.
For those larger 2021 savings goals, you may want to consider taking a more long-term approach by saving each month.
By actively using your spending plan, you can work out how much you could afford to save each month to fund your goals later in the year. You could also use your savings in other ways, such as adding to your retirement pot or putting money away for the kids or grandkids.
If you’re disciplined enough to start saving for the long-term, the possibilities are endless.
For interesting ways to save and stay motivated, visit our guide on savings challenges. Whatever you have in store for next year, you can get closer to your goals by planning and keeping on track with your finances.
If you’re considering a personal loan to fund your 2021 plans, you need to carefully think about whether this is the right option for you. For more information, visit our guide on personal loans and what you need to know when applying for one.
We are still in a pandemic. Many elements of life are still hard to predict.
Whatever new year money resolution you want to achieve, be prepared to be flexible. Nothing is stopping you from reassessing the situation a few months down the line.
The new year is a great time to set financial goals, but you can make changes and set yourself new challenges at any time. Being able to adjust to the unexpected is all part of developing a healthier relationship with money. And that’s a great goal in itself.