Is sorting out your finances one of your resolutions for 2021? If it is, you’re certainly not alone. Almost 1 in every 2 adults in the UK set a resolution to save more.1
And almost everyone has areas where they’d like to improve with their money and goals they’d like to achieve. But how do you make sure this isn’t a resolution that falls by the wayside?
Breaking things down into simple steps and getting stuck in straight away can help. Here are some ideas to get started.
1. Take a quick look back
Over Christmas and New Year’s, you’re likely to have spent a bit differently to how you did throughout the rest of 2019. Take some time to look back over your finances for the full year.
Were you able to save as much as you hoped? Did you clear your debts?
If you didn’t achieve what you wanted, try to find out where things went wrong. One of the easiest ways to do this is take a sample of 3 months and categorise your spending. You could start with these categories:
- bills (eg utilities, phone, internet)
- rent or mortgage
- eating out
Is there one of these areas where you’re spending far more than you thought? Was there a particular cost that threw everything out? Do you still have Direct Debits for subscriptions you no longer use?
You can use this information as the basis for a budget for 2021. This will help you keep account of where your money is going and also plan for any big expenses.
Explore more: How to create a budget
2. Assess your accounts
Are you happy with your current account? And if you have a credit card, does it still suit you? If not, now could be a good time to think about switching or cancelling any unused accounts. There are often good deals for people who switch, so look around to see what's on offer.
But before you jump into anything, make sure you look beyond any introductory deals and at the full terms and conditions. For example, if a credit card offers 0% interest for the first 6 months and then the interest rate dramatically increases, it may not be the best option.
Tip: It can be worthwhile looking at your suppliers for things like energy and gas to make sure you’re happy with the rate you pay. Comparison websites may be able to help you tell whether you have a good deal.
Explore more: Switching current accounts - what you need to do
3. Set your goal
Where do you want to be by the end of the year? It could be:
Once you’ve set your goal, break it down into small steps and keep it front of mind. This can mean setting yourself little milestones to reach by the end of each month and even doing something as simple as sticking a reminder onto your fridge. Be realistic. You don’t want to get 2 months in and feel like there’s no chance of reaching your target.
Explore more: How to make the right financial decisions
4. Settle into savings
No matter what your goal is for the year, building up your savings is likely to help you achieve it. If you’re focused on clearing some debts, this can be the next step once that’s done.
It can be helpful if you have a separate place you can store your savings, so you’re not tempted to dip into them for your daily spending.
If you have a savings account, it may be a good time to consider whether it’s working for you. If you don’t, it could be a good time to think about setting one up. The right kind of account for you will depend on your circumstances and goals. Knowing how they work will help you make this decision.
Explore more: ISAs vs savings accounts: what’s the difference?
Once you have a separate place to keep your savings, a good habit to get into is paying yourself first. This means that when you’re paid, one of the first transfers you make is moving your savings for the month into a savings account. Again, this helps you to remove any temptation to spend your savings.
Tip: If you find it easier, setting up a standing order can mean this happens every month without you having to lift a finger.
5. Think about the long term
It’s never too early to start thinking about the future. It’s great to have goals for 2021, but what about beyond? Perhaps you’d like to buy a property, start investing or put more into your pension.
Even if it feels like these goals are a long way off, it’s worth trying to picture when you’d like to achieve them so you can think about what you can do this year to get you closer.
If you’ve got somebody close to you that has recently done something like buy a property or start investing, it may be a good idea to have a chat to them about how they went about it and what their tips are. Everyone’s experience is different, but the more you know the better placed you’ll be.
Explore more: Planning for the future