Holidays are over and the party season’s spent – in more ways than one. If you’re trying to get over a financial hangover, try these tips for rehydrating your bank balance.
If Christmas and New Year have left you with a financial headache, now is the time to shake it off. Monday 11 January is already flagged as Advice Day – it’s set to be the year’s biggest rush for financial advice as people put their resolutions into practice. We’ve got some already lined up for you.
- Keep a financial diet diary
Just as you might record calories or alcohol units, keep a diary of everything you spend and save in the month. When you compare ‘before and after’ figures, you’ll see the benefit with your own eyes. (Your diary could also have multiple uses: a financial adviser will find it a great help when advising you, and if you’re applying for a mortgage you’ll need to have those numbers ready anyway.)
- Practice living below your means
Pick a random rich person, ask them if they feel rich, and the chances are they’ll say, ‘If only!’ Most of us have a terrible habit of living at the limit of our earning power, and mistaking luxuries for essentials. If you have a raise, a bonus or a windfall, learn to think of it as a piece of good fortune that might not be repeated – not as an entitlement. Then, if your luck does take a dip, you’ll have plenty of wriggle-room to get back on track.
- Take some risks
This might seem to contradict tip 2 – but it doesn’t. A lot of people miss out on opportunities because they refuse to take even small, manageable risks with their money. For example, many people with Cash ISAs still shy away from Stocks & Shares ISAs, citing ‘risk’ as their main reason. But although it’s true that investments can go down as well as up, the risks of short-term declines need to be set against the rewards of long-term growth. If you’ve wondered about balancing risk against reward, talk to an adviser.
- Don’t be impatient
There is some terrific financial advice out there – but very few short cuts. Be extremely wary of any investments that look too good to be true. Similarly, beware of anything that claims to be advice which is offered online for nothing. Genuine advice is paid for and tailored to the individual, and involves assessing your financial circumstances in detail.
- Treat your savings as a bill
One of our favourite tips, this: pretend your savings account is a bill like the gas or Council Tax, and set up a standing order to pay it at the start of each month. Otherwise you’ll be relying on leftovers at the end of the month, and we all know how well that goes. Be ruthless with yourself! The future You will thank you.
- Boost your credit rating
A good credit score doesn’t just increase your chances of getting a mortgage or loan – it can actually improve the terms of those loans, so that you end up having to spend less money overall. Taking a few simple steps to polish up your credit rating could pay you back some real money in the long term. Even if you think your credit score is perfect, mistakes can creep in, and even lack of information can work against you. Find out ways to improve your score here.
- Pay down debts
Following on from tip 6, eliminating your debts should be a priority. If you have any savings, there are few excuses to have outstanding credit card debts or loans. You’re paying much higher interest on those debts than you can earn in any savings account. In the majority of cases you’re better off using those savings to erode your debts down to a little as possible – preferably zero.
- Try something new
Always a good resolution for New Year. Have you become financially set in your ways? New opportunities and ways to save are coming onto the market all the time – yet you’ve been using the same low-interest savings account for five years, haven’t you? Something as simple as switching accounts can earn you far more interest. And what about new things like the Help-to-Buy ISA, or alternative investments such as peer-to-peer lending? Not all opportunities will be right for everyone – but you never know until you ask.
How many different ways could you refresh your finances in 2016? Put your plans in place by talking to a financial adviser – you can find one here.