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A budget is the single most important thing to do to get your finances on the right track. Not only will it give you an overview of your finances, it will also help you with the rest of the New Year money checklist.
There are many budgeting apps out there, both free and to pay for, but a simple budget can be produced in excel. The following template from www.moneysavingexpert.com is a great place to start. Alternatively, www.vertex42.com also have a various budget planners that you can download for free.
Start budgeting by going through your expenses for the previous year, to get a grasp of what you are actually spending.
A budget will help you know where your money is going, will help you realise what you are spending on items and the extent of costs that you may not be aware of. For example, if you buy a £3 lunch every day this doesn’t seem like much but can see over a year this will be £720.
Budgeting will also help you see which direct debits are still currently coming out of your account. Review these direct debits to ensure they are all still necessary. Are you paying for a gym subscription, but you haven’t been for 6 months, or signed up for a free trial that you’ve never used but turned into a direct debit?
Doing the above will help you see where you can scale back, where you can cut costs easily with a simple phone call.
A budget should help you save in advance for any upcoming events. For example, if you can budget in your car insurance payment for the year you can pay this upfront and save on the increased monthly payments.
2) Review your bills
There are various outgoings you can’t avoid, such as gas, electric and water. Have a look at any bills you receive to see what you are being charged for. Some companies charge if you’re not paying by direct debit, switching over to direct debit could cut your bills easily.
Use comparison sites to see if you can pay less for your current service. There are comparison sites for gas/electric/broadband etc. Alternatively contact your current supplier and ask what they can do, a lot of companies will offer you a discount to keep your service.
Include any bank charges in this review, find out what you are being charged for, some banks charge for travel insurance for example, which you may not need, or may be able to get cheaper.
Additionally, include any insurance in this review. Use comparison sites to ensure you get the cheapest cover each year.
Another good idea is to make sure everything you need to be covered is covered and that you’re not paying for anything you don’t need. It could be expensive if you’re not covered for something you end up needing, or you could be paying extra premium for items no longer needed, such as business miles.
3) Start an emergency fund
An emergency fund is a great idea, reducing the impact of any unexpected expenses, such as car repairs or boiler breakdowns. It is advised that an emergency fund should be anywhere between 3 and 6 months of all your outgoings, however anything is better than nothing.
4) Switch your current accounts
You may be able to get money for switching your current account from one bank to another. Although rewards for this used to be better there are still several banks that offer a cash reward or vouchers for switching current accounts under the current account switch service.
5) Review debts
Review any debts you currently have, so you know how much you owe, and how much the interest rate on each debt is.See if you can consolidate any of these debts or move to cheaper debts, such as transferring credit card balances to 0% cards. Pay off debts with any savings to minimise interest charges.
Always make sure you make at least the minimum payment on the credit card to ensure minimum fees and interest charges.If you are struggling with debts and they are getting out of your control, organisations such as step change can help with this. https://www.stepchange.org/
6) Prepare for the worst
Put procedures in place should anything happen to you to ensure your family will not be left out of pocket. Ensure you have made a will and make sure you have appropriate life and/or critical illness insurance to cover any expenses your dependants would struggle with should the worst happen.
7) Overpay debts and mortgages
Overpaying debts and/or mortgage payments could save you a substantial amount of money over the life of the debt. Make sure you can afford to do this and won’t need the money in the near future. Speak to your bank, loan or credit provider and ensure you are permitted to do this without charges.
8) Check your credit score
Check your credit score using a free credit score checker. Not only will you be able to see your score and be given tips on how to improve your score you can also check that everything is correct. Any incorrect entries could negatively effect your credit score, which could make getting a loan or mortgage more difficult.
Clear score – https://www.clearscore.com
Experian – https://www.experian.co.uk
Credit Karma – https://www.creditkarma.co.uk/
The start of the new year is a great time to review your finances and is a lot of people’s top resolution. Although, it will require some initial effort, putting the above steps in place will make organising and reviewing your finances on an ongoing basis easier in the future.