People often say there’s no point in making a new year’s resolution – and to be honest, January isn’t exactly the most joy-inspiring time of year for most of us. That said, the start of a brand new year (and a new decade, just to heap on the pressure) is probably as good a time as any to start thinking about addressing any changes you might want to make in your life, whether it be losing weight, changing your job or career – or learning how to manage your money better.
January is when debt charities receive their highest volume of calls and requests for help as many people find themselves in debt after a festive spending splurge.
Using credit to cover the cost of Christmas
A survey of 2,000 adults found that around a third of Brits have already or plan to rely on credit to help pay for the excesses of the festive period, with the majority of these on credit cards and overdrafts. Even more worryingly, an estimated 1 in 20 – around 2 million people – plan to or expect to miss a payment on their everyday household bills, which also risks causing significant damage to their credit score.
Unfortunately, the pressure to spend beyond what people can afford usually reaches fever pitch as Christmas approaches – particularly in the last few days leading up to ‘Super Saturday’, the last Saturday before Christmas which is usually the busiest shopping day of the year. This is where spending on credit cards in particular spikes as shoppers seek last minute bargains.
Of course, credit cards aren’t all bad – they can be used effectively to help spread large costs over time and are invaluable for those looking to build their credit score. But quickly racking up large unaffordable debts on a credit card is not sensible and will likely lead you into financial difficulties.
How to get your finances ship shape for the year ahead
If you’re already in debt, the first thing you should consider doing is clearing it before you start saving. Unless your borrowing method is interest free, you’re effectively owing a sum of money and paying for the privilege of doing so. If you’re really struggling to repay what you owe, there’s a bunch of debt charities and organisations out there who can provide help and support free of charge.
Another solid step to take is to create a monthly budget. Although more than half of households do keep a regular budget, that leaves a sizeable minority who don’t – increasing the risk of finding themselves having overspent at the end of the month.
The most important thing to bear in mind when setting your budget is to be realistic. When allocating money for food, bills or leisure activities, don’t underestimate how much you spend as you’ll only end up making the budget useless by overspending anyway. Be objective and look carefully at your outgoings to see if there are any areas you can ‘trim the fat’ and make some savings, but don’t expect the impossible!
Plan ahead with a savings account
By far the easiest way to avoid getting into difficulty is to plan ahead for events happening through the year – not just Christmas, but birthdays, weddings and other events where you might need to splash the cash.
You could do this by squirrelling funds away in a savings account – sometimes it’s best to save a smaller amount on a regular basis each month and build it into your budget so you’re not likely to have to dip back into your savings.
We offer a range of savings accounts which could be suitable for your savings needs, depending on what you’re after – you can view our currently available accounts by downloading our latest savings rate leaflet.