The new year sees many of us making resolutions of one sort of another. We will lose weight, we will stop smoking, we will get fitter.
Until the third week of January when we have all but forgotten the promises we made to ourselves not that long ago.
If getting on top of your finances was one of your resolutions don’t give up just yet. This is something you can do by introducing small changes once. The effects then, will go on. Here are some tips to get on top of your finances once and for all this year:
Know what you owe
It’s probably not going to be pleasant but if you owe money, you need to work out exactly how much it is. Don’t guess an amount and don’t hide your head in the sand. The first step to tackling any debt is knowing how much of it there is. Chances are you’re not going to like it but the truth often does hurt. Look at it this way, facing up means you are taking the first step. From now on, the only way is up.
Create a budget
Boring, boring, boring I hear you cry. Tough, I say. Creating a budget is the only way to know exactly how much is coming in and how much more or less is going out. When it comes to budgeting, Mr Micawber’s principle has it clearly set out: “Annual income twenty pounds, annual expenditure nineteen six, result – happiness. Annual income twenty pounds, annual expenditure twenty pounds six, result – misery.”
When working out your budget remember to include everything. Every bill, every outgoing, every standing order and direct debit… everything. It doesn’t matter how small or insignificant you think it is – even if it’s your twice weekly coffee shop habit, it will add up so put it in the budget. Account for extras, commuting costs or car maintenance costs for example. Don’t forget to include something in the budget for entertainment, whether it’s that twice weekly coffee shop habit or your Netflix account. Budgeting doesn’t mean cutting back completely, it means only spending what you can afford to, when you can afford to do it.
Once you have created your budget you will be able to see where your biggest outgoings are. This is where the real challenge begins. Start shopping around and see how much you can save by switching. Use price comparison sites to find better deals on everything from your car and home insurance to utilities to your broadband. Don’t leave anything unchecked. You’ll be amazed at how much you can save just by dedicating a few hours to researching better deals just once a year. How low can you go?
Throw money around
I don’t mean to literally start throwing cash around in the air. When you’ve worked out the savings you can make from one thing, don’t view that newly freed up cash as extra money. Throw it at your debts first and get rid of them quicker.
Don’t make it more painful than it has to be
We get it – sometimes we just need a break. We’re not telling you to live like a miser so make an 80/10/10 pact with yourself as follows: 90% of the ‘extra money’ we spoke about in the point before will be thrown straight to the debts, 10% will be go directly to your savings account and the remaining 10% is for you. Go on, treat yourself.
What do you mean, savings?
There is an oft-quoted rule of thumb that advises us to have enough savings for three months of living costs. Better still, make that six months. That’s when many people roll their eyes, think ‘what’s the point’ and don’t bother at all. Hold it right there. Anything is better than nothing so get into the habit of setting something – anything – aside that you can fall back on in the event of an emergency.
Get familiar with your credit rating
Don’t know what yours says? Find out. Not sure why you need to? Here’s an infographic from Stoneacre that tells you what you need to know:
What tips would you add to get your finances on track for 2016? Feel free to share them with us in the comments below!