12 Financial Resolutions for the New Year
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
1st March 2021
8 minute read
Starting a new year often means making resolutions to do with changing your eating habits, cutting a particular vice or reaching a certain target that will help your health and wellbeing. Whilst this early period of optimism in the year can leave you feeling proactive and looking forward to making changes, it can also lead to disappointment when you’re unable to stick to realistic goals.
The best way to change this cycle? Make your resolution a habit.
By making your resolution part of your daily or weekly schedule, chances are it will make it stick as it will feel like a part of your day, rather than an added extra that you don’t have time for.
An important resolution that is often overlooked is to improve your relationship with your finances. Interacting with your money on a habitual basis can ultimately lead to less stress and more confidence when it comes to debts, expenses and credit products you currently use.
Not sure where to start? We have 12 examples of financial resolutions that you can set for yourself, giving you a tangible goal that will make 2021 the best year yet for your money.
Open a savings account and reach your goal
One of the best financial goals that your future-self will thank you for is opening a savings account that will give you a pot of money that you can put to good use during an expensive period of the year. This could be for a summer holiday, Christmas time or even just a rainy-day fund that you can dip into once it has grown enough. But where to start and how to make your saving habitual?
If you’re lucky enough to already have a lump sum that you’re happy not to touch, you might want to open a Fixed Rate account with a good interest rate. Otherwise, there are a few options for savings accounts that generally fall under two options:
- Open a new account and automate – there are several different savings products all with varying interest rates and ease of access for you to choose from. When going down this route you simply need to open the account and make sure you can setup a standing order for regular deposits from your existing current account
- Switch to a different current account with free savings options – whilst you might be comfortable with your current bank, there are plenty of other challenger banks who have integrated savings options. These include Starling Bank who have savings goals easily accessible in-app. This is made even easier to switch via the Current Account Switching Service
Get your credit card back to £0 balance
If you already have a credit card, a great target to aim for this year is to get it back down to £0 balance, especially if you have managed to use the card over the Christmas period.
Like saving, the best way to do this is to set up a standing order and let the balance reduce in the background. This will usually lead to giving yourself an honest assessment of your income and how much you can afford to put towards your card, without putting yourself in a worse position.
- Check your current balance
- Find out when your card is expiring or if you have a 0% period that is coming to an end
- Calculate: your current balance divided by how many months you have remaining
- The answer is how much you should ideally pay off every month, as long as you stop spending on the card
Make your first investment
Investing might seem like an alien concept but it is often another option for those who would like to save money. The difference is with in investing is that, despite your capital being at risk, there is the possibility of you growing your savings pot.
One way to start investing is to opt for a Stocks & Shares ISA, where you can use an investment platform to boost your savings by investing in funds of your choice, with a strategy that will fit with your experience.
This usually works on a sliding scale of risk where the more risk you take on, the better possible return you will receive. The good news is you can also start with a small amount per month, so is ideal for those who haven’t necessarily got a lump sum to hand.
For more information on making your first investment, take a look at this article here.
Switch to a better current account
Whilst we have covered switching current accounts for the purposes of saving money, you might also want to switch for other reasons too. This might include the following:
- Switch incentive – many current accounts tempt customers to switch by offering a switch incentive. This mostly includes a cash incentive, so is a great short-term reward for simply switching, just make sure to check if there are any specific terms you need to fulfil as part of the offer (For example, you might have to deposit a certain amount per month in the account)
- Cashback – along with other perks of being a customer, some current accounts offer a limit period of cashback on purchases you make in certain retail outlets. You might find that another bank can offer you a set of cashback offers that align with your current lifestyle, so could be better suited to you
- Overdraft – do you currently not have access to an overdraft but would like one? Switching might allow you to take advantage of a better overdraft facility, especially one that is interest-free for a certain period of time
For more information on switching current accounts, take a look at this article here.
Pay off your overdraft
An overdraft might seem useful at first, providing you with a buffer in case regular expenses take you into minus figures prior to payday. However, some overdrafts can often end up costing a lot to use, so it might be worth making one of your goals to reduce and even get rid of your overdraft in the new year, so you aren’t stung by anymore daily charges.
Much like a credit card, you may have to pay off a little at a time on a monthly basis. Work out how much you are currently using your overdraft by looking back at your previous bank statements and then give yourself a deadline for when you would like to pay it off by.
With an overdraft, the earlier the better, so you can cut your additional charges and save money in the long run. The difference is, if you’re getting paid into the same account as your overdraft, you will just have to safeguard an extra amount each month, until you are finally no longer reliant on it. Then, it’s time to cancel the overdraft, the equivalent of cutting up your credit card.
Improve your credit score
Do you currently have a poor credit score due to previous financial difficulty? If you plan on getting a mortgage or take out a finance deal in the future, a great long-term goal is to make improvements to your credit score, giving yourself the best chance of being accepted. Check in on your credit score and then give yourself until the end of year to improve
Just a few ways to improve your score include:
- Register to vote
- Disassociate yourself from other people and addresses
- Take out a credit builder credit card
For more ways to improve your credit score, check out this article here.
Take control of your debts
Why not aim to reduce your debts this year? Or at the very least, reduce additional interest charges that could be holding you back from paying off your credit products. Whether it is a credit card, loan or overdraft, time to write down what you owe and how you can start to take control of your debts.
For example, if you currently have a credit card you are paying interest on, why not take a look at a new balance transfer credit card that has a 0% introductory period? This will save money on a monthly basis, which you can then use to pay off your balance.
Take a look at Balance Transfer Credit Cards here.
Find a better mortgage deal
When was the last time you checked in on your mortgage? If you’re not careful you can easily finish a period of low interest and slip into a standard rate, meaning you will pay a lot per month on your mortgage payments. Make finding a remortgage deal your next aim for the new year and save yourself some money.
Often your circumstances will change for better or for worse, so getting a remortgage deal can move the goal posts and give you a monthly amount and interest rate that suits you better. Find out how long you have left on your current deal from your mortgage provider and make a reminder for a few months before so you can start looking. Just by checking in with your mortgage in this way, you can tick off another financial resolution and save money in the process.
Have a look at our free MoneyMatcher tool to see if you could find a better mortgage deal.
Reduce your utility bills
Just like switching current accounts, by switching energy providers you can also access a better rate or better features that will benefit you in the long run. However, that might not be the whole story with your utility bills.
Are you being charged an estimated bill by your provider? When was the last time you provided meter readings? Checking in with your utility providers and comparing with other providers is a great way to start reducing your bills and giving yourself some money back every month. If you are able to reduce your monthly utility bills by the end of the year, you will can consider another financial resolution well and truly fulfilled.
Cancel unused subscriptions, reduce your expenses
By interacting with your current account and checking over your bank statements, you might be able to discover areas of expenditure that might not be required on a monthly basis. We are living in the age of the subscription service that can easily be forgotten about, costing you more in the long run. Examples include:
- TV streaming service (Netflix, Disney+)
- Premium delivery service (Amazon Prime)
- Food or drink service
- Membership payments
- Software package
- Online gaming access
Simply enough, if you don’t use the subscription anymore, cancel it and save yourself some money! You can fulfil this financial resolution by reducing your monthly expenses by the end of the year.
Always use an eligibility checker before applying for anything
Applying to borrow money is an important process, but one that can be hampered if you aren’t using an eligibility calculator. If you apply directly and get rejected, this can often have a negative affect on your credit score, as can multiple credit applications.
Instead, make it your financial resolution to search for credit products safely and securely from now on. Using our very own moneymatcher tool will give you an indication of what products you are likely to be accepted for, all without affecting your credit score. This applies for credit cards, loans and mortgage deals that you could be searching for.
Check your credit report every month
Another financial habit that is worth taking up is checking your credit score regularly. It will not only give you an indication of how likely you are to be accepted for credit in the future, it may also highlight other areas where you can make changes, in order to improve your credit score or even save money. There are plenty of free credit report options out there, including Experian, Credit Angel and ClearScore.
Where to start with your financial resolutions?
Whilst we have listed a lot of example resolutions for you to focus on, it’s worth tackling two or three to start off with so you don’t end up taking on too much. You might also find that some are tied into others, meaning you can tick off two at once!
By focusing on your financial resolutions on a monthly basis, you can develop a much better relationship with your personal finances in the future. First order of business: schedule a reoccurring hour every month at a convenient time and start ticking off those resolutions one by one. Good luck!