The new year is finally here, and for many, that means that it’s the perfect time to start making some positive changes in your life. For some, the aim will be to lose weight and start eating healthier, but there’s more than just your physical health to think about if you want to set yourself up for long-term success. Sometimes, a financial new year’s resolution could be the key to preparing yourself for the challenges of a new year.
If you’ve tried and failed at sticking to a budget in the past, and you want to improve your chances of cost-efficiency this time around, the following tips could help you to make the most out of the new year – at least from a monetary perspective.
Make Sure You Have a Goal
One of the biggest reasons that New Year’s Resolutions fail, is that people simply don’t have enough motivation to keep them focused throughout the next twelve months. If you’re trying to reduce your spending, then it’s helpful to have a goal in mind that you can think about whenever you’re tempted to use your money inappropriately.
Perhaps your reason for budgeting is that you’re sick of struggling to pay your bills at the end of every month. On the other hand, you might want to save up for something in particular, like a family holiday or a business venture.
Make Sure your Budget is Realistic
It would be nice to tell yourself that you’re going to start saving around £500 each month. However, if you’ve only got an income of around £900, and your rent costs £550, then that’s not going to be possible. Making sure your budget is realistic can be crucial to your success.
Think about exactly how much you spend monthly, and how much money you have coming in. Then, when you start to look for ways to cut costs, opt for avoiding luxuries you can do without, instead of essential purchases like food, and petrol.
Budget for Essential Expenses
When figuring out your budget, around a third of your wages should be dedicated exclusively to paying your bills. This includes managing your rent or mortgage, making car payments, or dealing with personal loans. Any bill that keeps your life running as normal is an “essential” expense, and something you can’t afford to cut down on.
If your bills take up more than a third of your wages, you might need to think about whether you’re willing to cut back on the extras to afford the essentials. Alternatively, you could look for lower mortgage rates or cheaper utility companies.
Budget for “Life” Too
Everyday bills aren’t the only expenses we face in our day-to-day lives. Just as a third of your wages should be going towards essential costs, a third should also go towards your personal expenses. This means that you can get a haircut when you need to, invest in a coffee with friends, or even go out occasionally, to check out a new movie.
If you’re struggling to make ends meet in your budget, then the expenses in your “life” category are the things you’ll need to cut down on first. After all, it’s tempting to be able to eat at a restaurant every week, but that’s not as important as paying your rent.
Invest in the Future
Often, budgeting is all about thinking about your money in both the present and the future. While you need to consider how you’re spending your money right now, you’ll also need to take the time to think about how you’re going to afford the essentials later in life too. Make automatic transfers to your savings accounts when you can, and remember to evaluate how much you’re putting into your retirement accounts on a regular basis.
As different parts of your life begin to change, you may need to re-examine your budget. After all, a pay rise could mean that you can save, and invest more money each month.
Keep an Eye on Savings
Finally, when you’re budgeting in the new year, remember that it’s always good to know you’re getting a reward for your hard work. Savings accounts allow you to build up interest on the money you don’t use, which means that you get more out of your cash. If you want to make your money work for you, consider savings account that generate a high return on investment. Remember though, you’ll also need an account that you can take money out of when, and if you need to. Don’t lock all of your resources away for the sake of interest.