The end of the year can make us feel energised and motivated towards new year’s resolutions and making positive changes, but whether it’s joining a gym, starting a diet, or changing financial habits, many people lose that motivation before the end of January. In fact, more than 50% of people that set themselves a new year’s resolution are unsuccessful, and a minuscule 4% of those who don’t make a specific resolution but still set themselves goals are successful in achieving them. This is because, despite our good intentions, habits and routines are difficult to change permanently, and this applies to our personal finances just as much as other everyday habits.

Considering the struggling economic health that the UK has been experiencing this year, many people are making money-based resolutions such as budgeting and saving. As we face further rises in household costs in 2023, you might also be thinking about setting financial goals for the new year to make your money go further and become more financially savvy, but the tricky thing can be sticking to them. If you’re looking for ways to improve your financial wellbeing in the new year, we’ve put together some suggestions to help your money stretch and top tips and tricks for maintaining your goals.

Save More

One of the most popular new year’s resolutions each year is to save more money. If this is something you’re thinking about taking on, there are several ways to approach changing your financial habits and increase your savings. You could start by simply evaluating your budget and understanding what you’re comfortable spending each month. Look at your monthly wages, fixed and variable expenses, and think about your priorities this year. You might have a bucket-list holiday coming up, a milestone event, or perhaps you’d like to focus on retirement planning – outline your top priorities and assess them against what you can afford.

Next, highlight any possible ways of cutting back spending. Some expenses are not as essential as others, so before making a personal purchase, consider if it’s something you can go without. Knowing the difference between wants and needs is a crucial part of saving.

Another great way to boost your savings is to sell things you no longer use or need. Resale apps like Vinted and Depop have been growing exponentially in the C2C marketplace sector, allowing sellers to keep 100% of their profits. Whilst selling your old clothes might not fix your financial challenges, it’s a great way to declutter your wardrobes guilt-free and earn money for your unwanted items.

Improve your credit score

If your credit score is below 670, many credit lenders consider this a low credit score, so you may be thinking about a new year’s resolution to boost your financial creditability.

The below table shows credit score ranges and what makes a poor and high score.

There are many benefits of having a high credit score such as qualifying for credit with better terms and interest rates. If you’re a first-time buyer looking to get on the property ladder, a strong credit score can also improve your prospects, showing that you’re a financially stable buyer, therefore, opening up your mortgage opportunities. On the other hand, a low credit score can lead to rejection for loans, difficulty being approved for a rental property, and higher insurance premiums. If you’re unsure what your credit score is, you can check this online for free.

Some of the easiest ways that can help up your credit score are to pay your bills on time and in full (setting calendar reminders or direct debits is an easy fix), pay off any debt such as overdrafts or credit card bills, and limit how many new bank and credit accounts you open. You can keep using any existing credit cards as they can help improve your credit score if used correctly, just keep an eye on your Credit Utilisation Rate (CUR). Your CUR is the total credit you use per month. It’s important to make sure you don’t max out your available credit as it could show lenders your dependability on loans. Many lenders look for a CUR of under 20%. You can work your rate out by dividing your total available credit by your used credit.

Build up your emergency fund

Planning for the new year can be a great time to think about an emergency fund and prepare for a rainy day. Especially considering how unstable the last two years have been due to the pandemic, it’s difficult to predict the future, so a sufficient emergency fund can help you avoid any financial unpredictability. If you own a portfolio of assets, an emergency fund can protect you from liquidating your investments at undervalued prices during unsteady markets, as well as support you in the event of redundancy or any other employment changes that may impact your regular income.

If this is one of your new year’s resolutions, the next question to unpack is how much you should save. This is a subjective matter, and the appropriate size of your emergency fund will depend on several factors such as your income, your lifestyle, any dependents you might have, and monthly outgoings. However, generally, saving at least 3-6 months’ worth of living expenses could be a comfortable amount to keep you afloat during any irregular periods.

Make meaningful investments

If your new year’s resolution is around investments, you could try to find new opportunities that match your personal values. An investment is an emotional attachment, so you could consider adding impact to your portfolio by investing in what you know and love. For example, this could be companies that promote diversity and inclusion or sustainable investments that help tackle climate change. If you’re passionate about property, you could consider property bonds. With Propiteer Capital, you can enjoy fixed-rate profits from high-end, diverse UK property. The flexible options with the Propiteer Capital Property bond allow you to choose the type of asset you wish for your investment to go to and how often you receive your profit, so you can easily plan your finances. Visit our website to find out more about our bond and how it can help you achieve your financial goals in the new year.

Sticking to your financial resolutions

No matter when you’re setting yourself new goals, firming up your plans can be difficult. Here are some of our top recommendations to help you stay on track with your resolutions:

Write things down

One reason why people struggle to achieve their goals is simply that they don’t write them down. Putting your objectives on paper can help you understand your circumstances, avoid having to rely on memory, and visualise what you’re aiming for. When it comes to goals like budgeting, jotting down your income and regular outgoings is a useful first step to improving financial health without having to keep everything in your head. You could go a step further and use a spreadsheet, which can help you stay organised, log your progress, and update your plans quickly and efficiently, or you could try a spending tracker app for your budgeting and saving goals.  

Give yourself time

Changing your habits isn’t easy, so be realistic and give yourself time to get to grips with your new regime. If your new year’s resolution is to clear any debt, for example, remember that this won’t happen overnight. Create a steady repayment plan, prioritising debts from biggest to smallest, check how much you have in savings, and work out how long you realistically need to clear your debt. Be sure to review your plan as you go and adapt it as needed based on what’s working and what isn’t, and don’t forget that there are many products and services that can help you. For example, if you’re working on clearing credit card debt, you could consider moving your outstanding balance to a 0% balance transfer credit card to avoid additional interest.

Keep it simple

Money matters can be overwhelming, which can be misunderstood as too complex and, therefore, putting many people off. Money management isn’t always easy, but be resilient and positive, and you’ll reap the rewards and satisfaction from achieving your goals. There are many areas of financial planning that can be simplified, so have a look into any apps, software, or services that can do some of the leg work for you. Whether you need help with tracking your debt, avoiding overdrafts, or cutting back on your spending, there are plenty of personal finance tools that can simplify the process.

Summary

Soaring inflation is taking its toll on households up and down the country. If you’re looking to make financial improvements, the new year is a great opportunity to start new habits and improve your financial health. Whether it’s upping your savings, increasing your credit score, or building up your emergency fund, be patient, realistic, and resourceful. If you are interested in managing your personal finances better, why not read more about improving your financial status by visiting our Personal Finance blog?

Recommended Read: Rebalancing your Portfolio in 2023: Tips, Strategies, and How to Do It