The beginning of a new year is always a time to reflect on everything that has happened in the year that has just passed, and also to look forward to the potential of the year ahead.
Some people like to make New Year resolutions to record their hopes of what they would like to achieve in 2024. Others prefer just to take each day as it comes and hope things will work out for the best.
But whatever approach you take to starting another year, what most people would agree on is that they’d like to be in a much healthier position financially by the end of the year than they were at the beginning of it. Whether you’re continually struggling to cope with the cost of living, trying to get rid of your debts, or hoping to start building some savings it would be great to get this area of your finances sorted in 2024.
So in this article we share a few tips for keeping your finances healthy in 2024. We hope that some of them will help you to achieve your financial goals this year, and end up in a much better financial position this time next year.
The first key step to getting on top of your finances is to make sure you have a clear overall picture of what is really going on. The best way to do this is to make a list of everything related to your money. You should include:
This will give you an overview of how your finances are looking, and help you to set priorities for the next few months and years.
Moving on to your priorities for this year, the next essential thing to do is to create a monthly budget. This is the foundation for healthy finances, and helps you to plan how you will use your money on a day to day basis. Your budget will also help you to understand where your money is going and enable you to start living within your means. This in turn will help you to start working towards your longer term financial goals.
So, continue the work you started in Step 1, and extend your list to cover in detail all the money you spend each month. It doesn’t matter whether you do this in a notebook, a computer spreadsheet or an app, just use whatever works best for you.
Start with your regular bills such as mortgage/rent, council tax, energy, water, broadband/TV/phone, insurances, car tax. Ensure that all these bills are paid by monthly direct debit. This divides the cost equally over the year and helps you to know how much is coming out of your bank account and when. You may also find that your suppliers give discounts for direct debit payments.
View your regular bills as “fixed costs”. The payments that have to be made no matter what. You then need to make a list of your “variable costs”. These are things that you also regularly spend money on, but the actual amounts will vary from month to month. They include things such as food, clothes, transport, entertainment, leisure, etc.
Once you have a comprehensive list of all the money you are likely to spend each month, you should be able to see whether the income you have coming in is enough to cover your expenditure or whether there is a shortfall.
Once you have created a budget it’s really important to test it out in reality. Your budget may look great in theory yet you may still get overdrawn towards the end of the month. If so, something is not quite right and you are probably overspending in one or more areas without realising it. So you need to track your spending for at least a couple of months to see what is happening.
So use a notebook, spreadsheet or phone app to record where every penny is actually going. You may be horrified to find that you are spending way more than you thought you were in certain categories, but once you know, you can make informed decisions. For example, you may decide to allocate more of your budget to the area in which you are overspending, and cut back elsewhere, or you may decide to change your spending habits in the area you are looking at.
The key thing is that tracking your spending will put you in full control of where your money is going so that you can make day to day decisions that work towards your financial future.
Whatever your monthly budget looks like, extra income will help to boost it and move you further forward to your financial goals. So another important element of keeping your finances healthy is to ensure that you maximise the income that you have.
Here are five ideas to try:
If you try one or more of the above, and are always on the lookout for other opportunities – such as selling items you no longer need – you should see your income start to increase, and can then feed that into your budget or your other financial goals.
As well as looking at ways to increase your income, it also helps to explore every way you can to minimise your expenditure.
Here are five things to try:
A key priority to keeping your finances healthy is to pay off unnecessary debt as quickly as you can. In particular you need to look at unsecured debts such as credit cards. If you have high credit card balances and are just repaying the minimum payment each month, it’s likely that most of your minimum payment will go towards paying off the interest on your credit card balance rather than the balance itself. Then more interest is added and the amount you owe increases again, which means that you are not going to get out of debt any time soon.
So make it a priority to overpay into your credit cards, even if that means dipping into savings to do so. The sooner you can get rid of your credit card debts, the more money you will have each month to reallocate, and you can build up your savings again.
Another option to quickly reduce credit card balances is to transfer the balance to another card provider at a lower rate of interest. Some providers may even offer 0% interest, but there is likely to be a transfer fee. If you do this, make sure that you pay off the balance as quickly as you can, as the 0% rate is likely to expire after a certain time. And also be aware that you will need to have a good credit score in order to be accepted for a credit card transfer.
If at any stage you feel overwhelmed by debt, the good news is that there is help available. Start by checking out the Money Helper website, a free and impartial government money advice service that can direct you to other sources of help as needed.
We all understand the importance of savings. In fact, financial experts recommend that it’s good to have a financial cushion of savings that could cover 3 to 6 months worth of essential expenditure if needed. Savings are also invaluable when you come up against unexpected bills such as a family emergency, car repairs or a new boiler.
However, an estimated 11.5 million people in the UK have less than £100 in savings to fall back on. If this describes you, make 2024 the year to change that.
The key concept of savings is “pay yourself first”. It can really help to think of savings not as yet another expense to be scraped together from somewhere, but as the most important payment of every month. It’s the key payment that will be part of your financial future.
So even if you have to start very small, make it a number one priority to put aside some savings every month in 2024. The easiest way to do it is to open a savings account and set up a direct debit to put something into it at the beginning of every month.
Look for a high interest savings account, and ideally one with limited access to your money. Some accounts will allow you to withdraw money either once or just a few times per year which is ideal. It means that you can get your money in the event of a genuine need, but not just dip into it whenever you feel like it.
As well as a regular direct debit, look for every opportunity to top up your savings. For example any unexpected money such as gifts, wins and bonuses could go straight into your savings account. Also consider doing a bit of fundraising for yourself, such as having a major clearout and selling lots of stuff, or going without something for one month and putting the money you would have spent on it into your savings instead.
With a small regular payment and as many top ups as you can manage, your savings will gradually begin to grow during 2024.
We hope that this article has provided lots of ideas and inspirations as to how to keep your finances healthy in 2024, and that you will look back this time next year and see some real improvements in your financial situation.