Get your finances back on track this January

January can be a difficult time for many reasons. The festive merriment has faded, the temperature has dropped even further and your bank balance may look particularly unhealthy.

Over the festive period it’s easy to get swept up in all of the sales, spend too much on presents and go on too many celebratory nights out. Many students will also have to pay travel fees to get home for Christmas. Recent research found that the average Brit spends £1,116 at Christmas, while over half of people who were already financially distressed said they would probably spend more than they should.

It can be challenging to get your finances back on track in January, especially for students and graduates who may already be strapped for cash.

Ashley Tate, chief executive officer at online student bill-sharing tool Split The Bills said: “So many of us justify impulsive spending over the festive period by thinking: ‘Why not? It’s Christmas,’ without considering the consequences. However, once January is here, those consequences become impossible to ignore when you are faced with the cold hard reality.

“But that doesn’t mean you can’t improve your finances and set out a plan to manage your money smartly throughout the year so that you don’t make the same mistakes next Christmas.”

A YouGov survey found that saving money was the third most popular New Year’s resolution among respondents, while 35% said they wanted to stick to a budget. However, in previous years, just over a quarter of survey respondents had managed to stick to their resolutions.

So, what’s the best way to ensure you meet your financial goals and manage money responsibly year-round?

Declutter and sell unwanted items

January is the perfect time to have a sort-out. Look through your wardrobe, under your bed and what’s kept in storage to see if there is anything you can part with.

Fabian Broeker, assistant editor at self-help money site Money Magpie said: “Declutter your house and declutter your life. Sell everything that you haven’t used throughout December; they are likely things you don’t need. This will give you a surprisingly large cash injection to kick start the new year.”

If you have received gifts over Christmas that you’re certain won’t be used, it might be worth considering selling them on instead of stashing them away in a drawer.

Ashley says: “Although you should appreciate any gifts you are given for Christmas, sometimes people just don’t get it right. Using second-hand shopping apps and websites such as eBay and Depop are great ways to pick up some extra funds.”

Further research found that a fifth of people occasionally regift unwanted presents.

Create a budget plan

A budget is a fundamental part of keeping on top of your finances. Without knowing exactly how much money you have coming in and going out each month, it’s impossible to figure out what you can save and spend. However, many students arrive at university without knowing how to manage money.

Fabian says: “Try to keep your lifestyle in balance and make sure to change certain expensive habits. Why not switch from high street brands to charity shops when it comes to clothing? You’ll save money and likely find better quality items.

“It’s hard to stay on top of your spending, let alone feel motivated to save if it’s all just digits on a screen. Draw yourself some diagrams; different pots for different aspects of your life. See how full they are and whether you think they could be more or less full. Draw this diagram again every month until you are happy with the balance of your finances.”

To begin, track every essential monthly outgoing and subtract that from your income. This may include rent, bills, and supermarket shops.

Dennis Harhalakis, founder of Cambridge Money Coaching adds: “Getting on top of your finances requires an investment of time and this time needs to be scheduled. Willpower is not enough. Make some time and stick to it.

“The most important step to managing your finances is to understand your spending. Without knowing where your money goes, you can never get control of your finances.”

You will likely adjust your budget each month, depending on how closely you follow it and whether your financial situation changes.

Ashley: “Becoming aware of everything you buy on a whim can be quite unsettling. You might discover that you need to cut back on unessential payments such as subscriptions and takeaways to meet your goals.

“It’s worth considering cheaper alternatives to some regular payments. These might include making coffee at home instead of buying a latte, buying fewer branded items or going for a run instead of paying for a gym membership.”

To make yourself more conscious of your spending habits, take out the amount you want to spend over one week in cash and only spend what you have on you.

Keep on top of your bills

When living with a partner or housemates, it can be easy to offload the responsibility of sorting bills to someone else, especially if you’re paying bills for the first time. However, this can make it difficult to keep on top of the utility costs, especially if price increases occur.

Joint accounts can be created to ensure everyone can keep track of all bill payments. However, this can result in bad credit scores for all account holders if anyone already has bad credit, if the account goes overdrawn or if payments are late.

Ashley adds: “Each person could take on the responsibility for certain utilities, but this can often be too complicated and cause trouble if somebody doesn’t pay their dedicated bill on time.

“A bill-splitting service can simplify the budgeting process by organising all utility payments into one monthly fee per person, so everybody is aware of the exact amount they owe. And it eliminates the risk of late payments.”

Get involved in saving challenges

A survey from 2019 found that 15% of Brits had no savings at all, with 22- to 29-year-olds being the worst at saving. While 40% blamed lacklustre earnings for not having saved, two-thirds of Brits confessed to not having a financial plan in place.

Ashley says: “Figure out what your financial priorities are. If you are saving for a house deposit, a summer holiday or a car, calculate how much you can save each month and how long it will take to reach the total amount.”

Once you know what you can afford, set up an automatic payment to transfer money from your current account to a savings account to ensure you don’t forget. Any money you received for Christmas can also be put into your account to prevent spending it spontaneously. You might also be able to find another account with better interest rates.

Ashley says: “Begin by going back to the basics. Get a piggy bank and put in any spare change you have. If you generally don’t carry physical money, use an app that rounds up every purchase to the nearest pound and invests the difference into an online savings pot.”

However, some more inventive methods can help you stick to savings goals, including changing your eating habits.

Fabian says: “The health benefits of ‘Veganuary’ have been well documented. But we’re sure many people aren’t aware of the financial benefits too. Generally speaking, meat and fish are the most expensive products in your weekly shop. Replacing these with more frozen veg and tofu, for example, will give you a healthy wallet and body for the new year. Put all that spare ‘meat money’ into a nice pot at the end of the month and see how much you’ve saved.”

Another way to creatively save money is the ‘1p Savings Challenge‘. This involves saving one penny on the first day and adding another penny each day until you reach £3.66 on the last day of 2020, which is a leap year. This amounts to £671.61.

Dennis adds: “Calculate what you spent on Christmas and aim to put away at least 5% of that amount each month and next Christmas will be so much better. if you can save 10% then you will have extra money at Christmas 2020.”

It’s still important to allow yourself some spending money and make sure your savings goal is realistic.

Ashley: “Trying to save every last penny you have can be counterproductive. You’re likely to get frustrated with never being able to go out or treat yourself and then buy on impulse. Saving less can sometimes be more practical.”

Job opportunities

When you realise you don’t quite have enough money to justify your Christmas spending it might be worth considering how to earn some extra cash.

If you are a student, you could get a part-time job if you don’t have one already and if you do, see if you can pick up a few extra shifts.

Young professionals with full-time jobs may be able to do some overtime, which can be great for catching up on work from the Christmas break while making extra money. However, if there isn’t a possibility of obtaining a pay increase, it might be worth seeking other job opportunities. January and February can be a great time to find a new role as businesses often gain updated budgets and may have postponed hiring new staff over the festive period.

Although checking your finances after Christmas can be overwhelming, it isn’t too late to put your money back on track. Setting goals, changing your spending habits and creating a budget will help you meet your New Year resolutions.

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