The festive season is over and many of us will have made New Year’s resolutions. But are we sticking to them or are they already a distant memory? It’s funny how we always hope and expect that as one year slips into another things will be different. Somehow we will have the money, time and energy to be the better versions of ourselves that we long to be. As such we have created this guide to show you how to get on top of your finances in 2019.
The problem is that if we are in financial difficulties then this is something that we do need to tackle head on, otherwise things will just get worse. There is no point hoping blindly for “something” to happen – be it a lottery win or an unexpected inheritance. The chances of such a windfall are very small, so the best thing we can do is to face reality and start to do everything in our power to get our finances in order.
Easier said than done we know! But here is our Five Point Plan for getting back into the black in 2019:
Get a clear picture of your finances
Many people are reluctant to look in any depth at their financial situation because they are scared of what they may find. But to be able to get your finances under control you need to know the full picture. Otherwise you will keep sliding further into debt without really understanding what is happening. So the first thing to do is to make a list of all the money that you owe ie loans, overdrafts and credit cards then any available money that you have eg savings, investments, gifts.
If you do have any money available it may be better to pay off some of your debts – particularly cards and loans with high rates of interest – as that will then ease pressure on your monthly budget (see Item 2). If you do not have any money available to offset your debt then you need to consider other ways of paying off that debt and ensure that you do not allow the amount to increase any further.
Create a monthly budget
Budgeting is hard but well worth doing: in fact it is the only real way to get yourself sorted out. First make a list of everything you spend each month. It doesn’t matter whether you do this on a computer or use an App or write it out by hand – whichever you prefer. But start with all the regular payments to which you are committed such as mortgage/rent, loan/card repayments, household bills, subscriptions etc. It is a good idea to set up monthly direct debit payments from your bank for all your regular bills. You will then know exactly how much is going to be taken out of your bank account and when. Then add on essential spending such as food and transport to work. Finally add on any other things that you regularly spend money on such as entertainment, clothes, hairdresser etc. This last category is the one where you may particularly need to make some changes so be honest!
Now make a list of all the money you have coming in every month. Include absolutely everything – salary, tips, bonuses, benefits, interest, gifts from family – anything that brings in some money, no matter how small, should be included.
Stick to your budget
Once you have everything down in black and white you will have a much clearer idea of what is going on. If your monthly income is enough to cover everything in the budget then you need to make sure that you stick carefully to that budget. For the first month or two it would be really useful to record all your actual expenditure in either a notebook or an app – because often budgets look workable on paper or screen but you still end up overdrawing. So you need to know where every penny is going!
If you find that on paper or screen you can not only manage but should have a little money left over then make sure you stick to your budget as just described – but also use the additional money to pay off your debts more quickly and also try to save a bit of money for either treats or emergencies.
However, if your budget shows a shortfall – ie you have less money coming in than needs to go out – then you need to take action. Read on ….
Make it work
Make living within your means the one New Years Resolution you do stick to. Unfortunately if you do not have enough money to get by each month then you really do need to address this and not run away from it. You need to sit down and work out a strategy to either raise more money or reduce your spending: or both.
Some ways you might want to consider raising more money include taking on extra work, taking in a lodger, or selling some of your unwanted goods on sites such as Jumia.
Depending how bad your situation is you may also need to take some tough decisions such as moving to a smaller home or selling your car. This is hard but could be worth it if it will enable you to get everything else sorted out and give you peace of mind.
At the same time you need to start reducing as much non-essential expenditure as possible. Also make sure you are getting the best deals from all your suppliers and get into the habit of shopping around for everything rather than paying more just for convenience. Also why not try to work together with friends and family to help each other out? For example you may be able to buy in bulk and share the cost, take turns to cook meals for each other, or share skills between you to avoid having to pay for things like babysitting, hairdressers, car repairs or home maintenance.
You may also want to consider taking an unsecured loan to consolidate all your existing debts and end up with one affordable monthly payment rather than several that you are losing track of. It is really important not to increase the overall amount of your debt, but many people find that just having one repayment to make each month gives them that much-needed fresh start.
As soon as your financial situation enables you to do this, you need to start saving money. It is really important to have some savings behind you. It means that you can either treat yourself to something nice in the future or that you are prepared for any kind of emergency that may come along, and won’t go under financially.
So as soon as you are able, start putting some money into a different bank account each month. Ideally make it an account that is not too easy to take money out of, as your savings will then have more of a chance of building up. Even if it is initially a very small amount it doesn’t matter: you are establishing good financial habits that will serve you well in future.
Getting on top of your finances in 2019 will be tough if you have not done so in previous years but utilising our loan search and credit scoring app can help to get you back on track.