Five new year savings resolutions you might want to make
Thinking about changes you can make to your life next year? Here are five new year savings resolutions you might want to make.
The pandemic has had a mixed impact on people’s personal finances as it maintained its grasp in 2021. But with the New Year looming, now is a good opportunity to sort your finances and set out what financial resolutions you’re going to make.
Regardless of your financial situation, the New Year brings a new start where we can cultivate good habits and stay on top of our finances. Emma Watson, Head of Financial Planning & Advisory Services at Rathbone Investment Management, shares her top five tips on performing a financial health check for 2022.
1) Set clear financial goals
A good place to start is to work out what your financial goals are, both for the short and long term (beyond ten years). Take some time to think about – and discuss with the people who are important to you – what you want your money to do for you and your loved ones.
Setting clear goals should help you to make the most of your money and establish good financial habits. It’s also important to review your goals on a regular basis to check that you’re on track to meet them and adjust them as necessary.
2) Keep a budget
Budgeting goes hand-in-hand with setting and working towards your financial goals. It may sound obvious, but a budget makes it easier to understand where your money is going, identify whether you can reduce or eliminate unnecessary expenses, prioritise your spending and saving, and ensure you’re always living within your means.
Budgeting should help you feel more in control of your finances and also help you prepare for any unexpected events or emergencies.
Good budgeting should include:
- Calculating your expenses, particularly in terms of essential and discretionary spending
- Keeping your day-to-day money and discretionary spending funds in separate bank accounts or pots
- Setting up direct debits for essential bills to go out on, or close to, pay day
- Paying off debts as quickly as possible, particularly those with high interest rates
- Keeping tabs on your income and expenditure by checking your bank statements on a regular basis
- Setting aside an emergency fund for unexpected expenses
- Making regular contributions to your savings, investments and pension.
3) Build a safety net
The global pandemic has taught many a big lesson about savings. It’s often recommended that individuals have between three to six months’ worth of their regular expenses saved in a ‘rainy day’ fund as a protection for unforeseen emergencies. While it’s not possible for everyone to save this much, trying to save a little here and there can build up to a bigger pot over time.
If you struggle with saving, why not take this one week money saving challenge?
4) Check your bank statements
A good way to keep tabs on your expenses is to keep track of your purchases. With online banking, and many banking apps now categorising spending, it’s even easier to identify non-essential spending and cut back. It’s worth keeping in your mind an estimate of your current account balance as well before checking, many of us underestimate how much we spend!
5) Consider investing
With interest rates on cash remaining low, for longer term goals it may be worth considering investing your savings, as doing so could help you grow your pot even further. Before you start investing, establish how much savings you need to keep in cash for shorter term priorities. As a general rule of thumb any money you invest should remain invested for a minimum of five years.
As part of this, ensure you are also putting money into your pension, the earlier you can begin saving for retirement, the better prepared you will be. Seeking guidance from an adviser will help you to ascertain what your investment strategy should be by considering factors such as your financial goals and attitude to risk.
Photo by Annie Spratt