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3 money resolutions to make this New Year

15 December 2015
4 minute read

money resolutions to make

New Year is a time for starting over. It’s a time to shake off bad habits and embrace new ones, to set goals and, of course, to make resolutions. If one of your goals for 2016 is to take control of your finances, here are the three resolutions that will get you there – and how to make them stick.

Do a budget Raise your hand if you have a budget. While you probably know how much you earn, very few people are good at planning exactly what they do with the money once it’s in their bank accounts. Start the year by drawing up a list of how much of your salary goes to expenses, how much you save and how much is disposable. Then look for opportunities to spend less and save more.

Make it happen: It’s easy to stray from a budget and then give up because it no longer reflects your financial reality. Make a date with yourself for a specific week night in every month – put it in your calendar – and then sit down with your bank statements and your calculator to make sure that your budget is still realistic and that you’re sticking to it.

Top tip: Download a budgeting app like Spendbook or You Need a Budget to help you keep track of your spending and saving.

Get rid of your debt If you do nothing else for yourself this year, eliminate your debts and commit to spending only the money that you earn.

Remember, if you only pay back the minimum required repayment, it will take a long time to get to a zero balance. You have to allocate extra money to getting rid of your debts as quickly as possible.

Make it happen: There are two methods for paying back credit quickly: the snowball method and the avalanche method. With the snowball method, you pay back extra money to the debts with the lowest outstanding balances first. This has the psychological benefit of seeing the number of debts that you have decreasing.

The second method is the avalanche method, in which you identify the debts with the highest interest, and pay those back first. The benefit of this method is that you get rid of the debts that are costing you the most, first.

You can choose which method will work best for you – both are considered to be sound strategies. The important thing is not how you do it, but that you are doing it, so get debt busting on 1 January. And don’t let yourself off the hook until every debt is paid off.

Top tip: Close each account as you finish paying it back and leave your credit card at home. Credit shouldn’t be a part of your day-to-day financial strategy, so get rid of as many opportunities to go into debt as you can.

Save, save, saveIt’s easy to borrow money now and pay later, but the cycle of debt can quickly get out of control. If you truly want to be financially free, you have to accept that you can’t buy anything unless you’ve saved the money for it.

Make it happen: First things first, make sure you are saving towards your retirement, no matter how old you are or far away it seems. A financial advisor will help you to work out how much you need to put away. This is classified as a long-term goal.

Once you’ve resolved that, set aside a portion of your disposable income towards your other savings goals.

You can split these into short- and medium-term goals. Short-term goals are usually two years or less – for example, if you want to save up over a few months to buy designer jeans or an iPad. Medium-term goals can be achieved in two to five years – like saving up a deposit for a house or car.

And remember you should always have an emergency savings fund of three to six times your monthly salary saved up, in case of unexpected financial trouble.

Top tip: Open a 32-day call account and deposit your short-term savings as soon as you are paid. That way you won’t be tempted to raid your savings in the course of the month. For your medium-term savings, speak to your bank about opening up a low-risk investment account, so that you can realise the value of higher returns while you save.

Make them so you keep themTackling these three areas of your personal finances will stand you in good stead for achieving financial fitness in 2016. But remember, so much change can be overwhelming, so break down your goals into bite-size chunks with regular milestones so you can track your progress along the way.

Happy New Year. We wish you all the best in making your resolutions and sticking to them in 2016.

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