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Ways to take control of your finances in 2024

We can all agree that the last few years have been a weird time for all of us, so let’s hope that 2024 has something better in store. And as everyday costs may rise even further, it could be a good idea to financially prepare for the year ahead.
New Year 2024 | Wealthify
Reading time: 4 mins

If you’ve been dreaming of better days lately, then we can only hope that a new year will provide us with fresh opportunities. So why not make sure that you’re in a good place to welcome any changes that could come (such as further rises to bills and other everyday expenses) by getting your finances in order at the start of the year?

If you're wondering where to start, here are some suggestions of things to do now to help set yourself up for the next 12 months.

Reviewing your savings

Let’s be honest, the last few years hit a lot of us very hard — both from a physical and mental point of view, and when it comes to our savings. While many of us may have had to dip into emergency savings to make ends meet due to the rising costs we're now experiencing, others may have been able to tuck more money away during lockdown and have continued to hold onto and add to them.

With that in mind, taking some time at the beginning of the year to review your savings will give you a better understanding of where you stack up and can help to realign your goals.

If you had to use your emergency savings, then you’ll probably have a new-found appreciation of how important they are. And those of you who managed to save more have the satisfaction of knowing that you have a bit more money tucked away for a rainy day. After all, if the last few years have taught us anything, it can be wise to expect the unexpected.

Two key things you could look for are:

  1. How much have you got in savings?
  2. Is your current savings strategy working?

Pick a savings strategy

If you just read savings strategy and thought, “what’s that?” then it may be time to find a way of saving that works for you. There are a couple of different strategies for saving money, and chances are you may be using one without knowing it. Some of the most well-known savings strategies include:

  • Tracking your spending – this really is as simple as it sounds, every week or month you look at what you’ve spent and check that it’s what you expected. By doing this, you may find that you have some rouge direct debits, or that you spent £175 on sushi, or your electricity bill has crept right up. Tracking and analysing your spending is a great way to see any potential savings you could make.
  • Paying yourself first – often, people save whatever is left at the end of the month. Paying yourself first removes the temptation of frivolous spending by putting money aside as soon as it comes in. There are a few more benefits to doing this, including that you know exactly how much you can save each month and how much you have to spend.
  • Save 10% - putting away large chunks of money can be daunting and difficult but saving £1 from every £10 you earn is a lot more achievable. Regularly aiming to put 10% of your income away each month will help you live within your means while building up a handsome savings pot. Although this is a ballpark figure, don’t feel bad if you can’t save this amount, and don’t use it to restrict you if you feel as though you could save more.
  • The 30-day purchase rule – someone once said, the best way to have money is to keep money, and the best way to keep money is not to spend it. You may think that’s a bit extreme, but it does raise a valid point that you don’t often need everything you buy. The 30-day rule takes a ‘think and reflect’ approach. So, say you see something in the shop that you really like, instead of buying it then and there, think about it for a month (or at least a day) – if you can’t get it out of your mind then get it. But if you forget about it, then you’re richer for it!
  • Rounding up – do you spend £4.75 on something and, in your head, you just call it £5? Well, the rounding up savings strategy is just that – in your everyday life, when you spend money, you simply round it up to the nearest £1 and tuck that aside. There are several banks that will automatically do this for you, making it as easy as spending money. And while these amounts typically are 99p or below, you may just be surprised by how quickly the pence become pounds.

There are many more savings strategies that you could use, but it’s important to find one that works well for you, so don’t worry if none of the above sound like they’re your cup of tea.

Start budgeting

Budgeting and saving are very similar, but also rather different. Budgeting takes a bigger picture approach to your money while saving focuses on how you’re putting it away. As with saving, there are many different ways to budget, and it’s all about finding your balance. Here are two popular budgeting techniques that you could use:

  • Give each £1 a job – this is really simple, especially if you’re already tracking your spending. For example, say your income is £1,000 a month, using this budgeting technique you’ll know that £400 of it goes on the mortgage, £100 goes on insurance and utilities, £200 will be your groceries, £150 is for saving, and the remaining £150 is your fun fund. The beauty of this approach is that it can easily adapt and change depending on fluctuations in your outgoings or income.
  • The 50/30/20 rule – similar to the rule above, but with more guidelines. Instead of giving each £1 a job, you’re sectioning off chunks of money based on ‘needs’, ‘wants’, and ‘savings’. In her 2005 book, “All Your Worth: The Ultimate Lifetime Money Plan”, Elizabeth Warren introduces the 50/30/20 rules. So, what is it? Well, it’s a rule to help you budget efficiently – but obviously, remember that your budgeting strategy should depend on your personal circumstances and financial situation, so you don’t necessarily need to exactly follow the 50/30/20 rule. The breakdown typically goes 50% needs – things like the mortgage, utilities, food, and transport – 30% wants – hobbies, eating out, holidays – and 20% savings – straight into the bank, paying off debt, or investing – again, you can change the percentages and find what works for you.

Finding something that works for you is important, as you want to ensure that you have some freedom with your money while being in a good position financially.

Think about investing

If you aren’t already, this could be the year you start your investment journey. You see, having loads of the money in the bank may feel great, but if it isn’t keeping up with inflation, then you could be losing out in the long run.

Inflation is an economic principle which means that over time, the price of goods and services generally increases. In recent years, the interest rate that you would typically receive from a high street bank in the UK often doesn’t keep up with the rate of inflation. This means, that while having a big chunk of money sitting in your account may look nice – if you leave it in there for too long with a low-interest rate, you may not be able to buy as much as you once could.

Investing, on the other hand, isn’t tied to any one interest rate. As you’re holding a range of different investment types from all over the world, there is much greater potential to make a return that outpaces inflation. And, just like finding a savings strategy or budgeting rule that works for you, making sure that your investments match your needs is just as important.

There are a few different ways you could invest. There’s the DIY approach, where you research, analyse, buy and sell, and balance your investment plan yourself. This is great if you have the time and know what you’re doing, but if you’re not confident and haven’t looked into it before, then it can be a daunting experience. The other option is to use a robo-investor, like Wealthify, where you pick the style of investing that’s right for you, choose how much you want to invest, then leave the rest to the experts.

Consider using your tax-free allowances

It’s a new year, but you may still have some of your tax-free allowance from the current tax year to use. As the tax year runs from April 6 to April 5, you still have a few months to shield some of your money from the HMRC.

This tax year, you could put up to £20,000 in a Stocks and Shares ISA, £9,000 per child into a Junior ISA, and up to £40,000 in a Personal Pension – however, one thing to bear in mind is that these allowances may change in the future. All of these options allow you to keep more of your money, with no need to pay income or capital gains tax on any profits you make. Not all of these may apply to you – if you don’t have children for example – and you’ll need to be comfortable not touching your savings until you’re 55 if you choose to put your money in a pension (and the national minimum pension age is changing to 57 from 6th April 2028).

Make the most of money apps

Technology can be a great way to keep track of your money, and with so many wonderful apps out there designed for just this, it could be a good idea to use one. You’ll be able to find apps that do almost anything, from showing you where all of your money is, across a number of banks, investments, and debts, through to investment apps that put a team of qualified professionals in your pocket.

Whether you’re struggling with your budget, or just want a way of making savings and budgeting automatic, using technology could be a good way to do just that.

The tax treatment depends on your individual circumstances and may be subject to change in the future. 

Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

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