Good money habits to start the new year

New year’s resolutions are all too easily broken – just think about that unused gym membership, the weekly park run and dare I say it, get on top of your personal finances.

To make 2021 the year you finally crack the last one, here are some really simple things to help get you started.

Make a budget

First things first, as simple as it sounds you really should draw up a monthly budget to help you manage your cash flow. It is surprising how many people we come across who have never budgeted and therefore have no real idea of how much and where they are spending their money each month.

Start by setting out your essential bills such as rent, mortgages and council tax, as well as other fixed costs such as utilities and insurance. Then move on to other regular expenditure such as food, travel, and subscriptions, before considering those other discretionary items that you feel you simply cannot live without.

Make sure you are living within your means, and by having a more structured spending plan this should give you a clearer view of how much you can afford to spend on things like holidays and going out (when the world finally returns to normal).

Get into a savings habit

We would also really encourage everyone to get into the habit of saving on a regular basis.  Ideally try to include a monthly savings amount in your budget, even if you start with just a small amount. Sometimes this is easier said than done, so to avoid temptation, you might want to consider setting up a standing order into a separate account on pay day. You might also find it helpful to set up separate savings ‘pots’ earmarked for specific goals – be it your first home, a new car or holidays.

Even if you are not saving towards anything in particular, it is really important to have cash savings to fall back on to cover emergencies and any unexpected costs – who knows when your car might need to be repaired or the boiler finally gives up the ghost.

As a rule of thumb, look to maintain at least three months’ worth of essential outgoings in a readily accessible savings account, which will also provide you with some security if you were to find yourself out of work.

Review your spending

Once you have a clear view of where and how much you are spending each month, this should allow you to see if you may be able to cut back on certain things. Just how much does that unused gym membership or the usual coffee on the morning commute amount to over the course of a year?

You might find it helpful to use online banking and there are a number of mobile budgeting apps to help track upcoming payments and review your spending patterns. You might find that you are paying for services or subscriptions that you are not making full use of, or you may not even be aware that you are paying for.

By knowing exactly where your money is going each month, you can make sure you are spending on the things that matter most to you and free up your budget to allow you to save more, particularly if you are finding it difficult to do so at present.

Shop around for new and improved deals

Going a step further, try and avoid overpaying for the services you receive. There could well be cost savings to be had by shopping around, starting with your household bills – think internet, phone, energy and insurance policies.

Online comparison websites are a good place to start to compare the best deals on the market and it is also worth speaking with your current providers to ensure you are on a suitable, and their most competitive, arrangement.

For homeowners, also keep an eye on your mortgage, particularly if you are coming towards the end of a fixed rate term as you may then move on to the lender’s standard variable rate which may not be competitive. By shopping around, you can make the most of the best mortgage deals and help you save on the cost of borrowing.

It is also worth checking the rate of interest that you earn on your cash savings. Whilst interest rates are at historic lows in the UK, you may still be able to make your savings work harder by switching accounts. Again, online comparison websites can help find the right account for you, depending on the level of access you need to your savings.

Track down your pensions

For most people, paying into a workplace pension will be the main way of saving for life beyond work, yet many people will be unaware of the pension pots they have built up during their career. The pensions you pay into through work do not automatically follow you from job to job, they remain as separate pots of money and the onus is on you to keep track of them.

If you do not know where to begin, start by making a list of all the jobs you have ever had during which time you may have paid into a company pension scheme. If you are unable to account for any pensions, try speaking with previous employers who should be able to point you in the right direction. There is also the government’s Pension Tracing Service which may be able to help you track down any lost pensions.

If you have a number of pensions, you may have the option of consolidating these to help ease their ongoing management and potentially save charges. However, you should make sure that moving a pension is in your best interests, so watch out for things like exit penalties that might apply or any safeguarded benefits that could be lost on transfer.

and don’t forget about them

Once you have sight of all your pensions, now is the time to start thinking about the role these will play in supporting you when you eventually step back from work, and the level of provision these may be able to provide.

Many pension providers will now allow you to register for online access which should make it easier for you to manage your pensions, allowing you to do things like having a say in how your contributions are invested.

Make sure you are taking full advantage of employer pension contributions and consider paying more into your pension if you can afford it. A good time to do this is when you receive a pay rise so you won’t notice the impact on your take home pay.

Stay on top of debt

Perhaps you simply spent a little too much over the festive period or you often find yourself overdrawn or relying on credit cards each month. Either way, it is important to stay on top of debt as it can easily spiral out of control.

Try to avoid paying high interest charges by prioritising paying any credit card balances in full each month and maintaining personal loan repayments. If you find that you are relying on credit to make ends meet, there are a number of reputable charities offering debt counselling and can help you restructure the repayment of any debt, so do not be afraid to ask for help.

Getting answers to questions and learning can be quick and easy and there are some excellent free to use online resources. Try www.moneyadviceservice.org.uk, set up by the Government to provide free and impartial money advice.

Regardless of where you are in your life or career, why not start the year by getting in control of your personal finances, becoming more financially secure and finally ticking that resolution off your list.