The New Year is a time for optimism and making plans to put our finances right. However, for some, a couple of weeks later, they face feelings of disappointment and failure. But 2022 doesn’t have to be the same as every other though, because there are some straightforward ways to make your resolutions stick.
What resolutions will you make?
The resolutions you make will depend on you as an individual. But Hargreaves Lansdown recently did some research into the typical resolutions that people tend to make. They surveyed 2,000 people and found that:
- The most common financial resolution is to pay off debt, which one in five people want to get sorted (20%)
- In second place is getting cheaper bills (17%), which has become even more of a priority now energy prices are soaring
- Third place goes to paying more into savings (15%). Starting savings also made it to joint fifth place (7%)
- The fourth most common financial resolution is understanding where we stand with our pensions (8%). Putting more into pensions also made it to joint fifth place (7%)
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, says: “Our research identified some of the things we’re keen to get sorted this year. At the moment, many of us are carrying Christmas debts, so it’s hardly surprising that paying this off is our top priority. But it’s not just about fixing broken aspects of our finances. We’re also pledging to build savings, pay more into pensions, and sort protection and investment.
“There’s always a risk that we head into every year with the same things that we never get round to. However, there are five steps that can guarantee you nail all of the most popular resolutions, and more to the point – that you stick with them.
“If at any stage, this starts to get overwhelming, the key is to get some help rather than giving up. If you need help controlling your debts, you can approach a debt charity like StepChange.”
There also plenty of other resources out there. Including blogs like Stapo’s thrifty life hacks.
How to make your resolutions happen
1) Work out where you are
It’s always worth using an hour or so on the quieter days between Christmas and New Year to take stock of your debts, savings, pensions and any investments.
2) Set your targets
The next step is working out where you want to be. When it comes to debts, the goal is usually to pay down any expensive debts. For savings, it’s building an emergency savings safety net of 3-6 months’ worth of essential expenses if you’re working age.
3) Draw up a budget
This isn’t what anyone wants for Christmas, but it lies at the heart of making all your resolutions a reality. Work out what you have coming in and going out, then use an online calculator to play with the figures, so you free up a lump sum of cash each month. Part of this process is making sure you’re not overpaying on your bills. Right now, soaring energy prices mean you can’t get a better deal than the price cap. But you should keep an eye on changes over the next few months and in the interim you can still shop around for mobile deals, media and broadband.
4) Use the cash you free up to hit your top priorities first
Start by controlling your debts. If you have debts, it’s worth seeing whether you can switch them somewhere less expensive, so more of your monthly payments can go into paying them off. Then, with the extra cash you have freed up, set up a monthly direct debit to pay them down as quickly as possible.
Once the expensive debts are paid off, you should have more extra cash in your budget. You could send part of it into a savings account to build up emergency savings, or into your pension,
5) It’s time to invest
Once you have sorted these aspects of your finances, you’re in a position to start investing, and making the most of your money for the long term.
Whatever financial goals you decide to set, good luck with them! Make 2022 your year!
