Now that the party is over, and the New Year hangover has passed, you may wish to focus on detoxing your finances. Whether it’s cutting back on your spending, starting a regular savings habit, or giving investing a try, making your finances healthier can require as much willpower and commitment as a full-on detox diet. Here are some tips that might help you become better with your money.
Make a spending plan
Start by making a note of all your monthly outgoings, like your mortgage/rent, bills, debt repayments, and other expenses and ensure you have enough money to cover all your payments on time – whatever’s left after all this has been accounted for is your ‘disposable’ income.
Planning your spending can help limit impulse purchases. When you go shopping, make a list of what you need and stick to it. If you like to treat yourself, set aside a small allowance. You never know, you might feel greater satisfaction from resisting temptation than spending. You can track your purchases with ingenious phone apps, like You Need A Budget and Wally, which give you great insight about your purchasing habits and show you where you’re spending too much on takeaways or other luxuries, helping you to make easy cut backs and save money where it counts.
Make savings where you can by reviewing your bills and other outgoings. Are you overpaying for your electricity and water bills? Websites like GoCompare and Uswitch mean it’s never been easier to shop around for the best energy and insurance deals. Another way to reduce your spending is review and cancel any existing direct debits for services you’re not really using, like membership for that gym you haven’t been to in 2 years, or subscriptions for services you rarely get time to enjoy.
If you’re paying off credit card debts, you might be able to reduce expensive monthly interest charges by transferring your balance to a card with a cheaper interest rate, giving you more breathing space to pay off what you owe. There are loads of different deals to consider, just remember to check the balance transfer fee too.
Don’t forget to treat yourself and loved ones. Detoxing your finances and enjoying yourself can be compatible, as long as you plan and budget. If you want to go on holidays or have lunch in the pub, make sure to organize in advance. Do your research: compare offers and have a look at any deals and vouchers available.
If you’re planning long-term, such as saving for retirement, organising your wedding, or preparing for your children’s futures, investing could help you reach the financial goal you need to achieve to make your projects come to life.
Turn saving into a habit and consider investing your money:
Create a rainy-day fund of emergency cash in case an unplanned cost shows up. Three months’ worth of living expenses is typically accepted as a good buffer for life’s curve-balls. If you can keep money aside, you’ll be reassured to know you’re covered in case something unexpected happens.
If you have money left over, put some into your savings account each month. The sum doesn’t have to be huge, but as long as you keep topping it up regularly, it’ll soon add up. It’s also a good idea to treat savings like any other monthly bills and set up a standing order or direct debit so that the money leaves your bank account on payday and you’re not tempted to spend it elsewhere.
Keep an eye on the UK’s inflation rate. When inflation is higher than the interest rate you’re getting on your savings, you could be losing money in real terms. So, if your goal is to grow your money over the long term, investing might be a worth a look.
If you’re willing to take an element of risk with your money, you can choose to invest, for potential higher returns. Becoming an investor is easy - with Wealthify, you decide how much you want to invest, and how long for. You can start with small sums and set up regular deposits.
Even better, no previous investment experience is needed, as ‘robo investing’ services, like ours, can do the hard work for you. At Wealthify, our investment managers can create a plan meeting all your needs and monitor your investments daily.
Please remember, investments can go down in value and you could receive back less than invested.
Investing is for everyone.
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The comments and opinions expressed in this article are the author's own and should not be taken as financial advice from Wealthify.