How to make your 2019 financial resolutions stick
January is the time when we resolve to kick our unhealthy habits, join the gym and manage our money better. Often, we start the year with big ambitions, only to find they’ve dwindled away and lost momentum by the middle of February.
This year, here’s how to make those good money habits stick, using some clever tips and tricks to keep you focussed and motivated.
Make it simple
When it comes to money management, the less hassle involved, the better.
If you have a system in place then you will save a lot of time on admin tasks, plus getting on top of your finances won’t seem such a chore.
Buy some folders and label each one for household bills, utilities, insurance and bank accounts. As soon as a bill comes in, make sure you pay it, and then file it away, marked with the date you paid it.
Try to handle each piece of paper just once, rather than leaving paperwork piling up on your desk and shuffling it around for weeks.
Consider having just one bank account and one credit card to make it easier to keep track of where your money is going and what you are spending each month.
Make it accountable
Make a list of everything you have coming into your bank account and going out. Don’t forget to include annual costs like car or house insurance.
Ask yourself whether you are spending more than you earn—is there a shortfall each month which goes on the credit card? If so, think about where you could cut back. Just a few pounds saved every day can make a big difference over a month.
There are lots of money management apps which can help you budget, including MoneyDashboard.com, which gives you a one-stop view of all your bank accounts, credit cards and savings account.
Make it safe
Everyone needs a safety buffer, and ideally, this should be the equivalent of at least three months’ expenditure in case you lose your job or are too sick to work. If you are self-employed, you might consider trying to save up to six month’s work of bills.
If there’s a choice between building up savings and paying off debt, you are always better off being debt-free. The interest rate you pay on cards, loans and overdrafts will always be more than the interest you could get on a deposit account.
If you have outstanding debts, it’s a good idea to pay off those that have the highest rate of interest as a priority.
If you already have savings, check the rates online at moneyfacts.co.uk where you can see the best deals on instant access and notice accounts.
Although interest rates are still historically low, you could earn interest in a top paying account like Tesco Bank, currently paying 1.42% interest, or Marcus, the new savings bank from Goldman Sachs, which is currently paying 1.5% interest. Both of these accounts have a bonus rate which only lasts for 12 months, so don’t forget to shop for a better deal around at the end of the first year when the bonus ends.
Or consider switching to a current account which pays you interest on your credit balance, like Nationwide or TSB, which both pay 5% on current account credit balances. Check the small print though, as there are a number of conditions attached to these offers.
Make it automatic
The less you have to do each month, the easier your financial life will be. If you set up direct debits to pay utility bills, credit cards and pension contributions then you’ll never miss a payment.
You could also benefit from opening a regular savings account into which you put a lump sum each month. You must contribute monthly or you’ll lose the interest. However, it’s this regular commitment which will help you build up a sum for a holiday, home improvements, nest egg or safety buffer.
Make a promise for the future
While it’s good to think about savings you can make in the short term, once you’ve got your debt and spending under control you need to think about the future.
If you are an employee, make sure you join your workplace pension scheme. Your employer may contribute additional money, which is effectively extra salary, and you can put in your own contribution straight from salary before you have a chance to spend it.
There might also be an employee share scheme or other financial perks which your HR department can tell you about. Some companies run free money management clinics for staff to help them organise and understand their personal finances.
Once you have joined the pension scheme, try to review your pension once a year to make sure that it's on track. Think about adding more money if you have a pay rise or a bonus.
If you are self-employed you’ll need to be more disciplined and self-motivated by setting up a direct monthly debit into a personal pension. If your payment schedule is uncertain or uneven, try to pay a percentage of the fee for each job you do into a savings account, and then make a pension lump sum contribution before the end of the tax year.
Make it tax efficient
Any spare cash you have should be working as hard as possible. A good way to earn a reasonable interest rate and protect your money from tax is to open an Individual Savings Account (ISA) in which all income and growth can accumulate tax free. This year’s ISA allowance is £20,000 per person and the tax year runs until April 4, 2019.
Make it cheaper
This month (January 2019) sees in the introduction of the new price cap on default energy tariffs. It is supposed to save 11 million households up to £120 each.
However, although the usage for a typical household will be capped at around £1,137, you will still pay more if you use a lot of energy in your home. Also, the cap applies to people who are on the Standard Variable Tariff (SVT), and not those already on fixed deals.
Rather than relying on the cap, it is worth using a comparison site to see what alternative tariffs are available, as you could save up to £500 by moving to a more competitive deal.
When it comes to car and home insurance, you’ll only get the best rates if you shop around and cultivate a habit of disloyalty. Unfortunately, loyal customers are rarely offered the best deals at renewal time and you may have to move in order to cut the cost of your insurance.
Make it happen
Good intentions are all very well, but you need to set a date to sort out your finances once a month.
Put a date in your diary or schedule into your smartphone calendar so it will definitely happen.