With the new year nearly upon us, here are some resolutions to make for 2016 and to keep for the whole year and beyond.
Start by looking after your pennies You know the old saying “Look after your pennies and you pounds will take care of themselves.”. It is not entirely true, you do need to manage your pounds too. It is, however, only too true that small expenses here and there can add up to a surprising amount when you actually stop and examine your spending. This in turn can have a long-term effect on your finances. Make some time to look at how you could reduce your spending without much, if any, impact on your lifestyle. For example could you make your own coffee to drink on the train instead of buying it every day? If so, the savings you make can be put to other work.
Learn to love budgeting Budgeting essentially means keeping track of your income and expenses and taking steps to ensure that you always have the money you need available when you need it. As a minimum you should have a budget which will see you from one pay day to the next, ideally with some money left over. It can, however, also be helpful to create an annual budget, since some times of year can be noticeably more expensive than others. Christmas is an obvious example of this and, for parents, school holidays can be another. Some people may also have variable income, e.g. those who earn commission and will therefore need to ensure that they save money during their peak earning periods to balance out the times when they earn less.
Pay off debts Sadly debts do not go away by themselves. Compound interest is wonderful when it works in your favour (i.e. on your savings), unfortunately it can be brutal when it works against you (i.e. on your debts). Before you get to work on paying off what you owe, you need to have an emergency savings pot set aside. This will essentially act as a buffer to help stop you needing more credit (which you may or may not get). How big this pot needs to be depends on your personal circumstances. As a minimum, think about which of your possessions would cause you the most pain to have to replace at short notice and have a plan (and finance) in place to deal with this worst-case scenario. Realistically you should ideally also have enough money set aside to tide you over in the event that you lost you job. In blunt terms this needs to take into account how long you are likely to need to find another one. With this emergency pot safely set aside, only to be touched if absolutely needed, you then need to start tackling your debts, beginning with the highest-interest ones, such as credit-card balances.
Start making financial goals What do you really want to do with your life and how much money will you realistically need to finance your dreams? Saving and investing can seem so much more rewarding when you are undertaking them with a concrete goal in mind. If your goal seems huge, overwhelming even, see if you can break it down into smaller pieces. At the very least try to give yourself little rewards along the way. It can sometimes help to keep track of your progress in a very visible way, such as a physical chart on a wall, where you can tick off each milestone and literally see how you are getting closer and closer to achieving your goal.
Komentáře