It’s that time of the year again. The time when we look towards the future with optimism and set resolutions for the months to come. From making better lifestyle choices, to learning new skills - the start of a new year always begins with the best intentions for change.
After a difficult couple of years of living with the Coronavirus pandemic, it’s hardly surprising that just under half of UK adults (44%) have listed ‘sorting out finances and better budgeting’ as their most important goal for 2022.
Setting resolutions is usually the easy part, but sticking to them for the long term is far harder. So, how can we turn these resolutions into reality and accomplish our goals once and for all?
Practice makes perfect.
When it comes to managing expectations, recognise that change won’t happen overnight. By continuing to practice your resolutions over time, you will start to form new habits which will result in small improvements along the way, creating a cycle of positive change.
To help you get started, we’ve put together a list of 7 financial New Year’s resolutions to undertake in 2022:
- 1. Set realistic, actionable goals
- 2. Make getting out of debt a priority
- 3. Work towards building an emergency savings
- 4. Cut down on expensive habits
- 5. Focus on energy saving
- 6. Reassess your subscriptions & memberships
- 7. Review your progress regularly
1. Set realistic, actionable goals
We put a huge amount of pressure on ourselves to quickly see results and success. But the truth is, the main reason why so many resolutions fail is because they are unattainable to start with.
First things first, set resolutions that are within your reach. Determine what your larger financial goals and outcomes are, but don’t stop there. As well as creating overarching goals, you should set actionable objectives that are:
These smaller milestones will help to provide direction to see through your objectives. As you start to see progress, you will feel encouraged to continue on the correct path.
2. Make getting out of debt a priority
The Coronavirus pandemic has exacerbated UK debt levels. According to StepChange, it is estimated that 4.6 million British people have accumulated £6.1 billion of debt and arrears since the outbreak, with utilities, council tax and rent being the largest areas that people have fallen behind in payments.
Starting the year in debt can bring huge amounts of worry and stress. It is crucial to tackle your financial problems head on, and creating an accurate and detailed budget can really help with this. These days, there are lots of budgeting apps that you can use to help keep on top of finances.
There are also a number of free and impartial money advice services available in the UK, so don’t be afraid to seek help if you need it. If in doubt, StepChange offers help with debt solutions and management, including arranging debt repayment plans with your creditors.
3. Work towards building an emergency savings
If there’s one thing the pandemic taught us, it’s the importance of being prepared for the unexpected. We could never have predicted the series of lockdowns and restrictions that resulted in job cuts, furloughs and business closures. As a result, many of us were thrust into financial shock.
The Money Advice Service estimates that 22% of UK adults have less than £100 in savings, yet it's never been more important to have a financial cushion to fall back on.
Opening a separate savings account for an emergency fund should be a priority. Once you’ve done this, you can then use your budget to work out how much money you can afford to set aside each month, transferring it into your savings account as soon as you get paid.
Where possible, aim to build an emergency savings that could cover you for 3 - 6 months. Don’t be discouraged if you’re far off that target. It doesn’t matter how big or small the amount of money you’re able to save is, the important thing is that you’re saving something.
4. Cut down on expensive habits
In 2019, UK residents spent an average of £14.48 per week on food and drink consumed outside of their home, totalling just under £700 per year.
One easy way to quickly save money is to spend less on eating out. As well as cutting down on how often you dine at restaurants, look at your daily routine as a whole. Do you buy lunch? What about your morning coffee? Cigarettes? A 2018 study found that hot drink lovers spend an average of £300 in coffee shops, while smokers spend an average of £1,971 per year on cigarettes.
When setting your objectives and budgets, meal planning is an important consideration. If you’re new to cooking, be sure to stick to recipes that are quick, cheap and easy. By meal prepping on weekends, you can have lunch and dinner for each day of the week ready to go, saving you money, time and stress.
As for coffee - swap out your daily Starbucks for a reusable coffee cup and machine that suits your taste buds and budget. Not only are these eco-friendly cups better for the planet, they’re also better for your wallet, and probably your diet too!
5. Focus on energy saving
The UK is in the midst of an energy crisis, and expensive energy bills are continuing to skyrocket. Typically, we are advised to shop around for cheaper rates and suppliers on a yearly basis. However, at this point in time you should approach switching providers with caution. Instead, contact your current supplier to find out if you could benefit from a better deal or cheaper tariff.
With energy bills at an all time high, focus on reducing your electricity and gas usage. A smart meter can help you better understand how much you’re spending, and what you’re spending it on. In addition, consider bad habits that you or the people in your household need to work on. Small changes can include:
- Turning off lights, heating and plug sockets at walls
- Taking shorter showers
- Reducing washing machine or dishwasher loads
If you’re feeling worried about your payments, contact your supplier as soon as possible. Ofgem has put rules in place to ensure energy companies are treating their customers fairly and helping to support those struggling with the recent price increases.
6. Take the ‘is it necessary’ approach
For many of us, seemingly small purchases can quickly add up. By adopting the ‘is it necessary?’ approach, you will quickly start to make smarter spending habits. This one is simple, if the answer is no - don’t spend money on it.
Start off by having a look at your ongoing subscriptions and outgoing payments. Are you on top of all your direct debits? Are your subscriptions still necessary? No matter how small these individual payments may seem, they will accumulate over the year and impact the total amount being spent.
As well as this, differentiate between the must-haves and the nice-to-haves and think carefully before signing up for anything on a whim at the start of the year.
For example, January is the busiest month of the year for gyms, with many of us flocking in force to register for memberships. Don’t be tempted by annual discounts and avoid signing on for any 12 month commitments unless you’re absolutely certain you’ll make the most of it. Just last year, the Global Health & Fitness Association IHRSA found that roughly 50% of January gym member sign-ups quit within six months of membership.
While health and fitness is hugely important, there are other ways of achieving daily exercise. Why not search for low-cost exercise classes in your surrounding area, or stream fitness videos for a smaller monthly subscription? Alternatively you can take up running or cycling outdoors and use parks as substitute gyms for free.
7. Review your progress regularly
We previously mentioned the importance of setting realistic goals in order to see long term success. Keep yourself motivated and ensure you’re making progress by fine-tuning your budget regularly for optimal financial planning and performance.
Review your budget and goals on a monthly basis and analyse what has worked, what hasn’t worked, where you’ve made savings and areas that still need improvement.
Your budget is directly linked to your goals, so keep track of objectives and milestones you’ve achieved or gotten closer to achieving - such as paying off debts, increasing your emergency savings fund or improving your credit score.
Remember, when it comes to achieving ‘new year, new me’, consistency is key!