If you do these things you will have a better, more comfortable and secure 2017.
Make a budget
You can’t plan anything financially until you know how much __money you have left after bills and essentials each month, and you can’t know that until you draw up a budget. A simple list of what comes in and goes out will show you how much you have to play with and can have a huge impact on how in control of your finances you are in the coming year.
Nick Hill, a spokesperson at the Money Advice Service says: “Even if you feel like you are struggling with money, making a budget will ensure you know exactly what is coming in and going out of your account each month.
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“It will also help you to spot where you could start cutting back on spending, such as cancelling unwanted subscriptions or making the most of your __money by switching suppliers or bank accounts. Making a budget is easy and the Money Advice Service budget planner is a great place to start.
“Be realistic about your income and how much you need to spend each month and then set yourself a budget so you know how much you have to spend. It is also worth thinking about whether you have any spare money that you could save, even £10 each month would contribute towards your summer holiday or those unexpected costs meaning you will be in a much stronger financial position for 2017.”
Have an emergency fund
It’s all very well saving for a specific purpose like a holiday but what everyone needs is an emergency fund held in an easy access account. You need to know that you have some funds ready if the boiler packs in or an unexpectedly high bill hits the doormat, or you risk falling into unplanned debt.
Generally accepted wisdom is that households should have at least three months’ worth of income saved in cash reserves, although some people recommend double that amount.
Research from the StepChange debt charity has shown that 13 million people in the UK lack the savings to meet their essential bills for just one month if their income dropped by a quarter, with low- and middle-income households the hardest hit. It has estimated that half a million households could be protected from problem debt if they had £1,000 saved.
Matt Sanders, money and protection spokesperson at the comparison site Gocompare.com, said: “Many consumers are still feeling the pinch, and while you should prioritise paying off your debts before trying to amass lots of savings, it’s still a good idea to try to build up a reasonable emergency fund in an easy access savings account.
“Compare what rates of interest are available for the sort of sum you’re looking to build up and start paying in a regular amount, even if it’s just a few pounds a week. You’ll be surprised how quickly you forget about the money coming out of your account and going into your savings pot.
“When choosing a savings account, check that there are no penalties for withdrawing your money at short notice. There’s little point in having emergency money in a 90-day notice account.”
Pay down debt
If you have outstanding debt racked up using credit cards, personal loans, store cards and overdrafts then you are paying far higher interest than you are earning on any savings. It’s essential to have some emergency savings, but after that it usually makes sense to clear pricey debt rather than save into a low-interest account.
Of course, if there is very little left each month after essential living costs and standard repayments have been made, it may be hard to find additional cash to make debt overpayments.
Financial commentator and money author Jason Butler says debtors should consider practical solutions: “You have to prioritise – not all debt is bad. You might decide to expand your mortgage horizon from 25 years to 30, you can get it extended if you’re in the right age bracket, and that’s a very long-term thing. It can bring down your monthly repayments considerably, which frees up more cash to get rid of expensive debt like store cards and credit cards.
“You need to get rid of the debt that’s expensive quicker; the thing sucking the life out of you is the short-term, high-interest debt.”
Save into a pension
Whatever your age, saving into a pension makes good financial sense. Since 2012, new auto enrolment rules mean that more than seven million workers have been signed up to their companies’ pension schemes, where both employee and employers contribute into the retirement savings.
Few people have chosen to opt out, but the number of self-employed workers operating within the gig economy has grown, meaning they do not benefit from auto-enrolment, although the Government is looking at whether this can be changed.
Taking stock of your pension may not make a difference to you in 2017, but in the longer term it could make a dramatic change to your financial security. Karen Barrett, CEO of the financial advice website Unbiased, says: “Today’s younger people may feel hard done by, struggling to make ends meet while their parents’ generation enjoys generous pensions. But the young have one massive advantage here: time. Time literally is money when it comes to pensions.
“By starting to save as early as you can, you can make up for having less to pay in, and ease the financial pressure on yourself later on. As a rule of thumb, you should aim to save at least a tenth of your monthly salary into your pension; any contributions from your employer will make this easier to do. Assuming you save for 40 years, this should put you on course for a pension pot that’s around 10 times the size of your average working-life salary. Any less than that and you will struggle.
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“Seeking independent advice now on your pension could prove the best New Year’s resolution you ever make. An adviser can do everything from help you choose the right plan to advising you on contributions, and even help you free up the spare cash with which to make them.”
Dedicate an hour a week
Those four tips will increase your financial security both in 2017 and the future. However, there’s another vital step that could save you money forever. Setting aside an hour a week to dedicate to your finances will mean that you have a much better chance of staying abreast of your money and maintaining the good habits you have formed.
With a dedicated “money hour” once a week – or even just once a month – you would have dedicated time to compare household bills and switch, check your income streams, move cash into savings accounts and generally manage your money more effectively.
For example, the comparison website MoneySuperMarket says more than half of its users can save as much as £284.50 on their car insurance, while switchers can save up to £670 on their energy bills.
When you factor in current accounts, credit cards, home insurance and all the money minutiae, it’s easy to see that setting aside time to deal properly with your finances each month will pay dividends in 2017 and beyond.
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