As the year draws to a close, the festive break is almost upon us and New Year’s resolutions are in the offering, now is the perfect time to consider your finances and ways you can make your money achieve more.
The misnomer of wealth management is that you need money to begin with – in many ways you don’t, just an appetite and a desire to plan for a better future and achieve more.
Please see below our list of festive (or even year-round) hints and tips to help you do just that.
Divide by 5 (or even 6)
In many ways, the days of weekly pay made budgeting easier, but as the majority of us now get paid monthly it can be useful to divide that down to 5 weeks (or even 6 if you are likely to get paid early in December).
Knowing in advance what you can afford to spend each week can help keep things from running away. Furthermore, on a nice four weekend month in the New Year, using this principle leaves you with some surplus to potentially save (more of that later).
Be cautious of contactless
Linked to the above, it can sometimes be too easy to let your festive spending get the better of you (especially when it comes to online shopping for presents and contactless transactions). Try to set limits and budgets – some bank accounts and apps let you do this.
Granny knew best
It wasn’t uncommon to see our grandparents save up and separate expenditure in separate jam jars – milkman, food, spends, holiday, birthdays, Christmas etc. Knowing what your complete annual budget looks like can make the difference between facing it confidently or racking up expensive debt.
Rule of thirds
A loose principle, but by having hopefully established a clear expenditure budget (controlling your spending and knowing what is coming in), it should hopefully be possible to apply this rule – spend a third (you were anyway and probably forgot something on your expenditure budget), save a third (emergency fund or short term commitments such as holidays, car servicing and next Christmas) and invest a third (put it away for the longer term, ideally using tax efficient solutions like a pension and / or ISA).
The same applies if you get a New Year pay rise – work out what that will translate to after a tax increase and divide by three!
Get in front and stay there
You’ve applied the divide by 5 rule and / or the rule of thirds and you’ve got yourself in front, great. Now it’s time to stay there and keep building. The ideal safety-net of an emergency fund is between 3-6 months net salary – keep going until you get there.
If you have some debt (and let’s face it there are very few of us that don’t!) get to know and understand your interest. The convenience of dipping into an overdraft or using a credit card can end up costing more in interest charges than your Christmas gift budget.
Prioritise clearing or at least reducing the most expensive debt first. Even the cheapest (often your mortgage) may be able to be switched to a better deal.
Ask for help!
The festive period can be a challenging one for many – mental health, physical health and financial health are much more closely linked than we give credit for and worries over money (whether it is ‘do I have enough?’ or ‘can I afford to retire?’) can bring a level of anxiety that feels physical.
To reduce this, it is hugely important to ask for help, whether this is from one of PM+M’s financial advisers, a debt management specialist or perhaps even the Samaritans (116 123).
Best wishes for the festive season and here’s to a brighter financial future in 2020 and beyond.