Setting New Year resolutions has become a bit of a marmite topic; some set them each year without fail and enjoy the process of self-development, whereas cynics roll their eyes at the prospect, citing examples of those who set lofty resolutions which usually fail within the first weeks of January.

There’s truth to both viewpoints - the new year is a great time to take stock of our current situation and take steps to improve ourselves and our future. However, our goals and the steps we take to achieve them must be realistic.

With this in mind, we’ve outlined 5 simple tips to improve your finances. These tips won’t make you a millionaire overnight, but they’re easy to implement and the benefits of them multiply if they become lasting habits.

1. Set clear goals and a plan for the future

An overlooked part of improving our finances is the importance of having a plan of where you want to be in future. The reason for this is simple - without knowing where you want to be, you can't know if you’re on track, nor can you identify solutions to help you get there.

Once you have a goal or plan in place, you can work backwards from that point to figure out what you need to do to get there. If you’re saving to buy a property for example, you start by knowing how much you need to have for the deposit (and other costs). From there, you can figure out how much you need to save each month towards this.  

This plan works best as an iterative process with regular reviews. You’ll be able to clearly see the progress you’ve made and allows you to make changes when necessary.

2. Complete a budget plan

In a similar vein, without knowing exactly what you spend money on each month, it’s impossible to identify and implement solutions to help you save more and reach your goals.

Completing a budget plan is therefore a key step in taking control of your finances so that you fully understand your current situation. You can do this by using an app which links into your bank accounts, using a spreadsheet to calculate your expenditure or by using a pen and paper.

Taking the time to review your bank statements will not only highlight your spending habits, but also the areas in which you can save money.

3. Review insurances, bills, and memberships

A budget plan will highlight your outgoings and allow you to review them to see where possible savings can be made and ensure you’re getting the best deal.

While the New Year is typically a time when new gym memberships are purchased, research shows that 1 in 10 of us spend an average of £40 per month on ones that we never use. Be honest with yourself about what you should spend money on and look to reduce waste where possible.

The rising costs of household bills is a regular topic on the news and Insurance providers have a bad habit of putting premiums up even when you haven’t made a claim. As such, you should regularly check if there is a better deal out there, which has become easier with the rise of comparison websites.

4. Re-mortgage when your deal ends and overpay when you can

Mortgages are commonly our biggest monthly expense as well as our biggest long term financial burden, so looking to reduce it and pay it off as soon as possible is often top of peoples lists.

Each year, a staggering 800,000 consumers don’t switch their mortgage even though their fixed rate deal has ended, despite the fact that the average annual saving from doing so is £1,000*. Just knowing when your fixed rate deal ends and re-mortgaging with your current lender (or another) when it does, is a simple habit worth implementing.

Additionally, if you have room in your budget to overpay on your mortgage, it’s an easy way of reducing the mortgage term and the amount of interest you pay. Before doing this, check any overpayment limits and be aware that any overpayments can be difficult to get back out.

5. Save regularly and look to invest

Once you have a clear understanding of where you are, where you want to be and have a good idea of how to reduce spending, it’s important that you build a regular savings habit.

The aim should be to send a fixed sum to a separate bank account at the beginning, rather than end, of the month. Once you have at least 3 to 6 months of outgoings saved for emergencies, you can then think about investing any additional sums.

With the current low interest rates on bank accounts, investing is one of the ways to get your savings working harder. While this inevitably means taking some risk which some people may not be comfortable with, the aim of investing is to generate additional returns.

The 2 main benefits to investing regularly are that you can benefit from compounding (making money on your money) and reducing risk from market fluctuations at a single point in time.

You should only look to invest if: A) you understand it; B) it’s regulated; C) it's in line with your attitude to risk; and D) you can afford for the value of the investment to fluctuate.

If there are things you are unsure about, then you should look to get financial advice.

In conclusion...

These 5 simple tips can help you understand your current financial situation and help you achieve your future goals - not bad for a New Year resolution, even for the cynics out there. While making some, or all, of these 5 tips your New Year resolutions for 2022 is a great step, the real benefits will come from having these becoming yearly habits.

*Source: https://www.fca.org.uk/news/news-stories/fca-issues-research-mortgage-switching

Investment returns are not guaranteed. The value of your investment may fall as well as rise, and you may not get back your initial investment.

The information here is based on our understanding at [January 2022]. It is for general information purposes only and should not be regarded as financial advice. It should not be considered a substitute for regulated advice on specific circumstances and objectives.

Please also note, our coaching services are provided on a non-regulated guidance basis and our advice services are fully regulated.