6 of the Best Financial New Year’s Resolutions
Successful financial planning requires detail and proactive thinking, so the New Year is a perfect time to sit down and plan your financial future. Here are our 7 money resolutions to help get your 2019 finances into shape.
- Identify Goals
Without a specific financial goal, it can be difficult to create a plan of attack. By making sure that the goal is measurable, resolutions will be more attainable than if they were simply ‘save more money’. It gives saving money a purpose and allows you to set yourself realistic goals. For example, creating an emergency fund that will allow you to survive for 3 months without a salary may mean putting aside £150 a month for the next 3 years. Alternatively, saving for a new £500 flat screen TV may mean putting aside £45 a month for the following year.
- Create a Budget
Understanding where your money is going each month will help you to cut costs and reach your financial goals. There are plenty of useful tools online that can be used to sync all of your accounts and track your money. In addition to this, you can curb spending by implementing the 30-day rule. If you see something that you would like to buy, write that item down. If in 30 days you still want the item or service, then buy it. If not, then you didn’t need it and you’ve saved some money.
- Eliminate Debt
Before you even begin to consider saving, it is vital that you work on paying off debts. These typically have much larger interest rates than savings accounts, and can include credit cards, student loans, car loans, and mortgages. The most efficient way to remove debt is through the ‘Avalanche method’, in which the minimum amount is paid to all debts, and any left-over money begins paying off the debt with the greatest interest rate. However, if you struggle with motivation then an alternative is the ‘Snowball method’. This involves paying the minimum amount to all debts, listing them in order of size (regardless of the interest rate), and paying off the smallest first. This will mean that you get to see your list of debts slowly decrease in number.
- Start an Emergency Fund
A significant portion of people resort to debt when they must pay for unexpected costs. By having some money stashed in an emergency fund, you can drastically reduce the impact of unexpected costs. Experts recommend having at least six months’ worth of expenses saved, but even small amounts can help cover costs when the going gets tough. Remember to live within your means – don’t spend more than you earn, and pay yourself first.
- Plan for Retirement
It is never too early to begin planning for retirement. Research by the FCA has shown that around one in three pensioners in the UK have not saved enough money. Simply relying on the state pension is not enough to maintain the standard of living that individuals expect. If your company offers you a defined contribution scheme, take full advantage of the maximum annual input that your company will match you with. Although this may be difficult when experiencing financial difficulty, it is worth focusing on as it is effectively free money. In addition to the tax benefits of saving into a pension, compound interest will mean that your money will make more money for you! A widely accepted amount to save monthly is approximately 15% of your monthly income. However, if this is not attainable then aim to save as much as you can realistically afford.
- Assemble your Financial Team
Having a team that works hard for you and your money can give you a financial edge over everyone else. If you have been looking for a new insurance broker, financial advisor, or tax planner, take the time at the beginning of the year to assemble your financial A-team.