In this guide we are going to take a look at how to get your finances in shape 💪 for the new year 🎉🙌.
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Creating a Budget
Making a budget and sticking to it as closely as you can is always the first step to get your finances on track.
A simple budget is a list of your expenses (your rent/mortgage, utilities, food etc) vs your income (wages and any extra income).
Track your expenses as closely as possible to make sure you are including everything – there are lots of different apps out there to help.
Once you have worked out your initial budget you can do a few things. You can figure out your disposable income by deducting your total expenses from your total income, to find the amount of money you have left to save or spend every month once you have budgeted for everything.
From here you can also start to figure out where you can be more lean, where you can reduce your outgoings.
Discretionary costs are a lot easier to reduce than your fixed costs, things like eating out and other luxuries.
Reducing your fixed costs and recurring payments such as rent, council tax or mortgage payments can be harder, but you may be able to find some savings by cutting out expensive services or finding alternative utility providers.
Build an Emergency Fund
Being prepared for unexpected expenses that could break the bank is really important.
Starting and building up an emergency fund is a key part of a solid personal finance plan.
How much you should save is open for debate – you could argue that storing too much money in a low interest bank account is a bad idea – but it is important to have fast access to your emergency fund.
Work out how much you would like to put aside, then set up a standing order every month to move the funds into a separate account.
Once you have hit your goal you can decide whether to continue or start saving towards another target.
ISAs & LISAs
ISAs are a government approved tax-free method of saving and investing. ISAs are a bit of a no-brainer – they have a lot of plus points and are a great way of starting to save.
If you are 18-40 then you can make use of a Lifetime ISA (LISA).
LISAs allow you to save £4,000 every year until you are 50 and the government will rather generously apply a 25% bonus to your savings, up to a maximum of £1,000 per year.
If you are thinking of saving towards a getting a house 🏠, or even if you aren’t, they are a great way of putting aside some money and actually getting a good solid return on it.
Switching Utility Suppliers & Getting Cashback
Loyalty can cost you money – make a list of your utilities (especially the ones that are due to renew soon) then search for alternative deals using comparison sites and your own research.
Check all your utilities, your phone/broadband supplier, vehicle recovery, home/phone/vehicle insurance and anything else you can think of.
Using cashback sites generally is a great way to earn a little bit of extra spending money every year, on top of the savings you can make if you can look out for the best deals on your suppliers.
Be careful not to get reeled in by a good introductory offer that actually costs more in the long-run, cashback sites can be great but you might find a cheaper or more ethical deal elsewhere.
Frugal Food & Meal Prep
If you currently eat a lot of take-out or spend a lot on individual meals, you should dig into the world of frugal cooking and learn how to prepare & freeze your food.
There are 10,000s of guides, recipes and perspectives out there – but the basic idea is to combine discounts and the frugal acquisition of staple foods such as vegetables, grains, and protein sources, making them into a selection of meals (or just one if you are starting out), then to store the meals away – some in the fridge and some in the freezer.
There is a myth that vegetables are expensive, but if you plan ahead, shop wisely, and buy wholefoods locally/organically or buy in larger quantities, you can often buy things at a cheap price.
Look for cash & carries or local Indian/Chinese supermarkets that sell food in bulk/have good deals, and make meals in bulk, not just enough food for one sitting but for 4-5+ meals.
If you have the space in your house a bigger freezer can be a great investment to help you lower your food bills.
Pensions & Employer Matched Pensions
Saving for a pension is important. If you haven’t already done so you should make sure you are saving towards your retirement.
If you have a workplace pension, your employer may offer something called contribution matching.
This means that your employer agrees to pay more towards your pension, if you also agree to pay more towards your retirement.
If you have the chance to do this then you should absolutely take up the opportunity, as it will help you build up your retirement funds faster – a portion of which paid by someone else!
Dealing with Debt
Debt is a serious topic, so if you think you may have a debt problem you should speak to a debt advice organisation such as Step Change.
If you are at University you should speak to your university support services – they may be able to offer help and financial support.
There are different types of debts, and each will have a different rate of interest. If you have debts with a higher rate of interest one thing you can consider is consolidating them with another lower interest form of borrowing.
You should also always speak to your lender if you are having difficulties as they may be able to reduce or freeze the interest.
If the amount of debt you have is becoming unmanageable there are various debt solutions available in the UK – which one is best for you will depend on a lot of different factors.
If you have a job and are able to repay your debts a debt management plan or IVA may be suitable. As part of a debt solution your lenders may agree to reduce or freeze your interest payments, making them faster and more affordable for you to repay in the long-run.
Other more extreme solutions include Debt Relief Orders (DRO), Debt Arrangement Scheme (DAS) if you are in Scotland, or bankruptcy – all of which are potential solutions if you are no longer able to make reasonable payments towards your debts.
Ditch Dinosaur Banks
Banking has seen a revolution over the last few years in the UK. A range of new banking services have popped up making use of technology and apps to offer an advanced/upgraded service to consumers.
The second you pay for something you will get a notification in your app telling you the amount you paid and to which company. This is great for both budgeting and security.
All three services allow you monitor and manage your spending, with Monzo and Starling also offering tools to allow people with gambling addictions to block gambling sites.
Revolut offer temporary virtual cards which can be created then destroyed, which protects you from cyber crime if your card details are stolen.
Monzo offer banking to people with no fixed address, which means that people with housing and homelessness problems can apply for a bank account.
If you are less interested in technology you may want to look into which bank accounts offer the best switching bonuses.
Learn to program, find a side income or start a business
2019 could be the year you start something amazing. Whether you think you can learn to program or not – you would be surprised how easy it can be to launch your own secondary income stream, business, or even an app!
Get creative, ask for help, learn how to do new things – and you could be surprised at what you can do.
If you want to build your own website you can make use of WordPress – the platform that powers this site. It is free, easy to learn how to use, but incredible flexible and powerful.
If you need help there any army of plugins, WordPress experts and communities around the world that can help you – both free and paid.
8 years ago I launched Dumb Funded, and now it is one of the income channels that allow me to work for myself full-time – and similarly there are 10,000s of bloggers and influencers out there making a part-time side income.
Do you have an interest in a niche topic? Start a blog, YouTube channel, Twitch account or Patreon.
If you enjoy making things you can sell your products on your own website, or other services such as Etsy, Facebook and Amazon.
Avoid Tech, Tax and Other Scams
Scams are not a new thing – the Nigerian prince scam is hundreds of years old. However the internet has allowed scammers to reach more people than ever before, and scammers are making use of clever tricks like leaving voicemails and web advertising to bring them in new victims.
There are some rules you can follow that will give you a strong amount of protection from scammers:
- No legitimate company will call you out of the blue to offer you a refund, tell you have won a prize/grant you didn’t apply for, or try to connect to your computer and tell you there are viruses or hackers.
- Don’t share your personal details, pin codes or passwords with anyone that calls up
- You cannot pay your taxes or similar using GIFT CARDS such as Google Play or iTunes cards.
- Nor will any reputable organisation call you to ask you to send or verify funds using Western Union or other money transfer services.
- HMRC will never call you using the phone and threaten you with arrest for unpaid tax bills.
- Your bank will never call out of the blue and ask you to ‘verify your funds’ or provide usernames/passwords over the phone.
- If you get a random phone call from someone who says they are from your bank, HMRC, or any other organisation, simply hang-up and call them back on their official phone number from their website.
- Ask as many questions as possible – scammers often read from a script and are unable to answer the most basic of questions.
If you fall for a cyber-scam unfortunately there is frequently not much you can do to recover funds, but in the first instance you can report the crime to Action Fraud, and speak to your bank if it involved bank funds or credit card provider if you used a card.
We hope you found our guide useful! Please share it with your friends, family and colleagues to help them get a good start to the new year.