It’s the start of 2022 and the perfect time to set some financial goals.
As we all know, keeping to a New Year’s Resolution can be difficult; chocolate is my downfall, Dreamies are Troy’s, but we still try to stick to the resolution nonetheless.
Sticking to a financial resolution can be just as tricky, so it’s important to keep the resolution achievable and not too difficult.
Have you thought about what financial goal you would like to achieve this year?
Well, here are 4 that I think could be worth considering.
Set Up A Personal Budget
Have you ever taken some time to put together a personal budget plan for the year? If not, then this could be the resolution for you.
Having a budget plan can make all the difference in achieving your financial goals.
It might sound difficult but it’s actual very straightforward.
The 2 main things to do are:
- Track your income
- Track your expenses
If you do both of these you will have a better understanding of what’s coming in and what’s going out.
There are plenty of apps to choose from which can help you with this, or you can build an excel spreadsheet if you’re that way inclined.
It’s then important to see if you can make any of those expenses cheaper, and/or see if you could reduce your day to day spending.
For example, replace that weekly tasty pizza takeaway with a store bought version. You’ll probably save £15-£20pp.
See if you can make some small changes to your budget this year to help you save more.
What you could do if you’re really committed is:
- Go through the last 12 months bank statements.
- Break down your monthly spending into categories: bills, food, cinema, nights out etc etc.
- Average these out over the year (just add them up and divide by 12).
This will give you a true reflection of your expenditure and help you identify where you might be able to cut back.
Have you got a particular purchase this year in mind? It could be that you want a new car, or a deposit for a house. If so, it’s time to start saving.
Set a goal on saving an amount each month.
If you’ve worked out your budget as explained earlier, then you should have a good idea of what you could save.
Those cut backs could be the difference to meeting your goals sooner rather than later.
Consider putting a % of your income in savings immediately after you’re paid, 20% would be ideal.
If your take home pay is £1,800 pm, then you could aim to put £360 in savings. The remaining £1,440 is what you live off for the rest of the month. If you do this every month, you’ll have saved £4,320 by the end of the year.
Save what you feel comfortable and what is sustainable each month. Once you have that figure, stick to it!
Pay Of Debt
If you have credit cards and loans that need paying off then you may consider making this your priority this year.
Paying off debt can feel a bit daunting, especially if it’s creeped up over Christmas. Having a set plan and goal in mind at the start of the year can help ease the debt stress.
This can be broken into 2 plans:
The first thing to do is to review your financing and see if you can make it cheaper. Refinancing your credit cards and loans could save you a significant amount per month.
Start off by looking through your debt agreements and find out what interest rates you’re currently paying.
The trick here is to replace your existing debt with an alternative credit option that has a 0% interest rate.
If you have credit cards with a high interest rate then you could balance transfer these to a 0% interest credit card. You can read more on www.moneysavingexpert.com and check whether this option would work for you by using their eligibility calculator.
If you have a loan or overdraft with a high interest rate then you could money transfer to a 0% credit card. You can read more on www.moneysavingexpert.com and check whether this option would work for you by using their eligibility calculator.
Both are new borrowing, and any form of borrowing can be dangerous so please make sure you understand what you’re getting into before agreeing.
Start by transferring your debt with highest interest rate and then set up a direct debit to pay it off.
Paying It Off
With this option your aim is just to pay whatever debt you have off.
Start with the debt that has the highest interest rate and aim to get that cleared.
You could have a repayment plan by paying any surplus income that you saved from budgeting into the debt.
Paying off debt is so liberating, and what an achievement this could be for 2022!
Invest In Yourself
How about using 2022 to invest for 2023, 2024 2092 and so on? Do you ever stop to think about future you?
Some small changes and some small investments now could help future you so much that they wished they had a time machine to come back and thank you.
Brush up on your understanding of investing and finance; investing in yourself is the best investment you’ll ever make.
You could start here with How To Invest: The Very Basics. Then upgrade to something a little more complicated 7 Steps To Be Successful On Your Investing Journey.
When you have an understanding of how and what to invest in then the next step is to consider some future goal that you might have. This could be retiring at age 45, buying a bigger house in 10 years, whatever it might be you could get there quicker.
Consider how much spare capital you have to invest and what you would be happy risking. Consider what sorts of investments you would like; do you want to pick your own stocks, do you want to invest in ETFs, or do you want someone to make those choices for you?
You could speak with a financial advisor who would help you build your plan and invest your money if you’re unsure.
If you start making some investments now hopefully your money will grow quicker than if you were just saving it.
Any investment should be for a minimum of 5 years. If you’re going to need the money in 5 years then please save it instead.
And that’s it…
You may have a different Financial New Year’s Resolution, whatever you choose I hope you stick with it and 2022 is a fabulous year for you.