The new year is a time for setting resolutions, leaving old habits behind and adopting new ones. According to Statistics Brain, making better financial decisions sits as the third most popular new year’s resolution behind losing weight and self-improvement. In-fact, around 42% of people admitted to setting a money related resolution.
Often though, we are guilty of setting the bar too high with our new year’s resolutions. We want to save £1000 in 3 months so that we can book a summer holiday, we want to save for a mortgage, pay off our mortgage. However, one month in and we’re not on track which leaves us feeling unmotivated and ready to fall of the wagon.
Below are 5 simple financial habits that are easy to adopt and will have an extremely positive effect on your finances:
1. Stop Buying Things on Impulse
Often if we’ve got nothing to do at weekends or even on our lunch hour, we may find ourselves aimlessly walking around the shops with no real intent or need to buy anything. However, something catches our eye; a bag, a t shirt perhaps even a new pair of trainers. We’ve already got perfectly good trainers, bags and t-shirts but we still choose to spend money on a new item, simply because we like it. This is unnecessary impulse spending and it costs us significantly every month.
Never buy an item the first time you see it. Make a note of the item you’ve seen, go home and assess if you’ve currently got a similar item that is fit for purpose. If you have – don’t buy it, if you haven’t, shop around. Often online retailers are cheaper than high street stores, sometimes you may even be able to find a cheaper alternative item. Only return to the place you originally saw the item if you really need it and you’re unable to find a cheaper option elsewhere.
2. Create a Monthly Budget
Gone are the days where budgeting required a full day’s attention and stacks of paperwork. Everything you need to create an effective monthly budget can be found online. What’s more, you can do it all within an hour, meaning you can do it one evening, on a lunch hour or even before work – if you’re an early bird!
Simply open your online banking and an online budget calculator – on separate devices if possible, this will make it easier to flick between the two but it is not essential. Use the data from your online banking to fill in the budget calculator.
This will give you a good idea of your disposable income and allow you to identify any areas that you may currently be overspending on. From this you’ll also be able to set savings targets and create contingency plans for short term and long term financial goals.
3. Negotiate Better Deals on Your Regular Monthly Outgoings
Regular monthly outgoings such as household bills and living costs provide a great opportunity to free up more disposable income.
Often when you rent your property you’ll be handed a provider meaning your room for negotiation is limited. However, if you own your property you have freedom over your chosen provider for gas, electric and water. This means that if you’ve been with your current provider for over 12 months, you may not be getting the best possible deal.
If you’ve been with your current broadband, TV and phone provider for a while, there’s a good chance that you’ll be able to negotiate a better deal elsewhere. Often, providers offer their best deals to new customers (e.g. half price for the first 12 months), so by jumping ship you could find yourself paying considerably less for your package. Alternatively, you could use this against your current provider to get a better deal as they’ll usually be willing to go over and above to keep your business.
4. Take Action to Clear Credit Card Debt
Having credit card debt looming over you is not only stressful but it’s expensive too. By paying the minimum amount each month you may feel as though you’re chipping away at the balance but in reality, interest is accruing on the outstanding balance at a similar rate.
By clearing your credit card debt you’ll find yourself with more disposable income each month and less stress. Check out our recent post on clearing credit card debt for a simple step by step guide.
5. Open a Savings Account
This is the simplest of all finance related new year’s resolutions. All you need to do is go into your bank and open a savings account. You’re probably thinking; ‘but I don’t have any disposable income to save’. That doesn’t matter, what matters is that you’re taking the first steps to saving money.
When you don’t have a savings account and all your money just sits in a current account, it can be tempting to spend any cash that’s left over at the end of the month. By having a savings account available, you then have the option to put that leftover cash into the saving account rather than spending it.
With time, you may be able to put £50 per month into the account at the start of the month rather than the end. As you condition yourself to live off £50 less each month, you may then want to increase that to £100. Before you know it, a year has passed and you’re sitting on a few thousand pounds worth of savings without even compromising your lifestyle.
The new year provides a great opportunity to reassess and improve your financial situation. If you haven’t already done so, try these simple financial habits and let us know what effect they’ve had on your finances.