It’s that time of year again: the time to start afresh and set yourself new challenges for the year. Yet sadly, many of these well-intentioned resolutions are likely to be broken by the second week of January – I don’t care what you say, you can’t live without chocolate!
But what if you want a resolution that you can actually stick with?
Sometimes, seeing your money stack up can be all the motivation you need to keep going, so you might want to make ‘getting my finances in order’ one of your New Year’s resolutions.
Easy and effective financial resolutions
The key to setting financial resolutions is that they need to be worthwhile - otherwise, what’s the point? With this in mind, you may want to set goals that complement each other – for example, to generally reduce your spending and save money, or you may have a single goal in mind like building up a house deposit.
Here are a few money resolutions that you could set yourself this new year:
Review your spending last year
Let’s start with a really easy goal – reflecting on how much money you spent last year. Don’t just fixate on places where you feel you overspent or any purchases you regret but look at your good money decisions too. Having a balanced view won’t just make you feel better about your position, but it could give you more ideas of what you can do to improve your situation by increasing the good stuff and cutting down on the bad.
Create or review your budget
If you already have a budget, then the New Year provides a great opportunity to review it and make sure that it still works for you going forward. A lot of things can change in a year, you may have had a pay rise, moved house, or seen your cost-of-living increase – so, making sure that your budget still works for your needs could be useful for managing your money.
Don’t already budget? This could be a great time to start! The simplest way to start a budget is to look at all the money you have coming in (and all the money you have going out) each month and then working out a way to make those things balance out to work for you.
If you struggle to stick to a budget, why not create a spending plan instead? That way you choose what you can spend money on, rather than what you can’t. It’s a small shift, but it might make a big difference!
Reduce your spending
One of the easiest ways to save money is by reducing your spending – that way, theoretically, the money that you didn’t spend you can save instead! But how do you go about reducing your spending in the first place? The first thing you could do is to look at your budget and see if there are any areas where you’re clearly overspending – and it’s important to note you can save without giving up the things that make you happy.
Instead of giving up things like going out for food, why not look to see if you can save pennies in other ways, such as checking for better deals on your energy or insurance or seeing if you could save money by using a different supermarket for your weekly shop?
However, if you do want to make a big change, why not try to introduce some new habits that could save you some cash.
Increase your savings
One of the most popular New Year’s resolutions is to save more money, which, frankly, is a much more sensible resolution than giving up chocolate! If this is going to be one of yours, there’s a few ways that you could increase your savings, whether that’s by rounding up the pounds and slowly increasing your savings with your spare change or putting aside a chunk of money each month.
If you choose to put aside a lump sum each month, then you may find it easier to set up a direct debit after you’ve been paid – essentially like a subscription to your savings. Doing this means you’ll have a better idea of when you’ll hit your savings goals, but it also means you don’t rely on having money left over at the end of the month to grow your savings.
Paying off debt
Having debt can make it very difficult to save, especially if the interest rates on the repayments are really high. So, if you’re in this boat, why not set up a financial resolution to pay off the debt you currently have? It’s always easier said than done, but there are plenty of things you could try to make this easier. For example, if your debt is on a credit card, then you could try to move it over to another card with 0% APR – this way you’ll be able to chip away at the debt without having to pay off extra due to the interest too.
Think about investing
If you have quite a lot of savings and are a bit fed up with the poor interest rates you’re getting from them, then you may be looking for a way to make your money work harder. If so, investing in the stock market could be something that you may want to look at – and if you want to see how saving your money compares to investing it, then check out our Savings Calculator.
You don’t need to know everything to start investing or need to have loads of money saved up either. With Wealthify, we aim to make investing as simple as saving, which means all you need to do is put money in your account and a team of experts will do everything else for you!
Be smart with tax
It doesn’t matter if you’re saving or investing; being smart with your tax could help your money do more in the long run. For example, with an ISA (or Individual Savings Account), you can currently save or invest up to £20,000 tax-free each tax year (though this is subject to change in future). And the best thing is, this is just a yearly allowance – so, if you paid in £10,000 a year, then after five years you could have £50,000 sitting tax-free in your ISA.
The tax year runs from the 6th of April to the 5th of April each year, and by tucking money away in a tax-free ISA, you could see your money growing quicker as you’ll get to keep more of your money. Remember, with a stocks and shares ISA, your capital is at risk as the value of your Plan can go down as well as up and you could get back less than you put in
Think about your pensions
If you’re young then retirement may feel like it’s ages away, and if you’re already thinking about retirement then knowing who your pensions are with can be really handy. One way you could get on top of this is to move all your pensions into one place.
The average person will hold around 12 jobs throughout their lifetime, and with the introduction of workplace pensions in 2012, that could mean they have 12 pensions too! That’s a lot of different things to manage, but you could bring your pensions together for a clearer view of your salary in retirement. Plus, you may just find that you’re saving on fees too as each pension provider will charge their own!
Check your subscriptions
Nearly everything seems to be a subscription service these days, which means that your Direct Debits can easily mount up without you realising it. Next time you have a few minutes, why not scroll through your bank statement to see what regular payments are going out and take some time to think about whether you still use them or not?
Some things will need to stay – like your internet or utilities providers - but you may find some subscriptions to services that you don’t even remember signing up for. Like that time you were convinced that you could learn Welsh in a month so took a 30-day free trial that ended up rolling over every month because Welsh is anodd iawn (very difficult).
Think about others
If you have your own children, or you’ve got close friends or family with kids, then you may already be considering more ways to save for them too. With house prices going up as they currently are, and the cost of living increasing, they could need all the help they can get! But before you despair, the good news is that you could save or invest in a Junior ISA for them, and they won’t be able to access the money in the account until they reach 18.
And with Wealthify, our Friends and Family Payments allow you to supercharge your child’s future with help from others – like their grandparents or aunts and uncles. They could pay in regularly like pocket money or choose to put money in as a gift - whatever works for them. That money will then be invested for the child until they’re 18, where they’ll be able to use it for anything they’d like.
Consider investing in line with your values
In recent years, there’s been a huge public push for companies, organisations, and governments to have more of a positive impact on people and the planet. You’ve probably heard the popular phrase “voting with your wallet”, and the UK public are doing exactly that, with 68% of UK investors saying they want their investments to help deliver solutions to overcome societal and environmental challenges and take proactive steps to avoid causing harm to people and the planet.
If you’re in the 68% of people wanting to make a positive difference with your money, then an ethical investment plan with Wealthify could help you do just that. We’ll actively manage your investments to check that every business in every fund you’re invested in is always striving to have a positive impact, so you don’t have to worry about checking this yourself.
Already doing all of this?
Great job! You’ve clearly got your finances in order, but could you be doing more? If you’re still looking for New Year’s resolutions, the answer might be yes.
Why not look at setting yourself new targets, both short term and long term? Or maybe see if you could get a better interest rate on your emergency savings?
If you look for it, there’s always something you could do to make your financial situation even better!
The tax treatment depends on your individual circumstances and may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
You should seek financial advice if you are unsure about investing.