Christmas is over for another year – and right now, your bank balance may be looking particularly worn-out after all that festive spending.
Indeed at this time of year, many people will be wondering how they’re going to stretch what’s left until their next payday.
But while it may feel like we’re doomed to repeat the same spending patterns year after year, it doesn’t have to be this way – 2019 could be the year when everything changes.
Here, Sarah Coles, personal finance analyst at Hargreaves Lansdown (hl.co.uk), suggests steps to get your spending back on track.
Start a spending diary
Most of us find it difficult to work out where our money is going. Keep a spending diary for a few weeks, to highlight expensive habits or hefty bills. Mark each expense as either essentials you can’t live without, or luxury spending. Keep a notebook handy, or use an app.
Shop around for essentials
You can’t cut out essentials like utility bills, water charges or insurance, but you can cut the costs by shopping around. If you haven’t switched for a while, you can shave hundreds of pounds off annual bills. Put aside some time with comparison websites – you’ll be amazed at what you can save.
Put financial dates in your calendar
They’re not the most thrilling diary entries, but it pays to know when insurance policies are up for renewal, or savings bonuses or interest free credit periods expire, so you can switch and save.
Build an emergency cash savings safety net
Once you have paid off any expensive short-term debts, money you’ve saved each month can be channelled into an easy access savings account. The aim should be to build up three to six months’ worth of expenses which you can use in an emergency.
Manage debt wisely while you’re paying it off
You can’t pay it all off overnight, so make sure you’re not spending a fortune on your borrowing in the interim. Hargreaves Lansdown’s figures show that more than one in 10 people pay for their festive overspend by dipping into their overdraft – which can be an expensive way to borrow, and can set you back more than £50 a month. Switch to the cheapest possible method of borrowing, so your repayments are paying off your debt rather than servicing it.
Don’t use credit limits as an excuse to keep spending
If you get a new low-interest loan or credit card, it’s tempting to take advantage of your full credit limit. However, this simply means running up more debt and building a bigger problem. If you’re going to get back on track this year, fight the temptation.
Don’t neglect the long term
It’s important to revisit pensions and investments once a year, to see if you’re on track. If you work, your employer may have automatically enrolled you into a pension. Check how much you have put away and where it is invested. An online pension calculator will help you see whether you’re on track for retirement, or whether you should consider contributing more or changing your investments.