The arrival of a new year is an excellent excuse to refresh aspects of your life. New Year’s Resolutions are ideal opportunities to enshrine the changes you’d like to see in something that will hold you accountable, and hold your motivation throughout the year. This can be especially useful when it comes to personal finances. Saving money is more difficult than spending it, as many more of us have discovered over the past year. If you want to get a handle on your finances in 2024, where should you start?
Debt Prioritisation
Going into the new year, your primary and priority consideration should be that of any debts you may have to your name. Debt is extremely dangerous to long-term financial security, and especially so if it is allowed to accrue. Interest on debt is the effective throwing-away of money that you could otherwise be putting to one side for yours or your family’s future; the sooner your debt is eliminated, the sooner you can save more each month.
Within debt clearance, further priorities need to be made. Some debts are low-risk, and can be left quite comfortably alone. Young debts with long 0% interest rates are not a priority concern, and neither are steady long-term debts like mortgages. The highest-priority debts are high-interest ones that wick more money away unnecessarily. These can be grouped into one via debt consolidation loans, and dealt with much quicker – while satisfying the prior debt-givers and improving your credit score in the process.
Reviewing Your Spending
In order to pay down these debts – or indeed save your money – more efficiently, you will need to have a comprehensive understanding of your present spending situation. You’ll know exactly how much money you have coming in each month, but do you know how much you spend on average? And on what it gets spent?
The best way to get a handle on this is to use your bank statements to pull together a spending map of your last month or two. More data means you can get a more precise average on what spending in each area of your life looks like. Doing this might reveal some surprising areas where money is being disproportionately spent.
Budgets and Saving
With a handle on your debt burdens, and an understanding of your month-to-month finances, you can now start thinking proactively about the future. Your income, minus unavoidable and essential expenses, will tell you the absolute maximum amount you could be saving each month. Working back from this figure, you can come to a more realistic idea of what you should be putting away.
Enshrining this budget into practice could be as simple as setting a direct debit to your savings account on the day you typically receive your salary. This way, the money cannot be mistakenly spent, and you can keep yourself honest each month with how much you are allowed to spend on yourself.
