It’s the new year and although things aren’t quite as we hoped, with another national lockdown in place, we can make a new start in some aspects of our life. There couldn’t be a better time to review your finances and get into good spending and saving habits.
Start budgeting in January
By setting a budget, you’ll have a clear and accurate picture of your spending. Start by collecting your bank statements, payslips, benefit award letters and pension documents so you know exactly what’s coming in. Next, gather details of all the regular bills and services you pay for.
Separate regular household bills from debt payments (such as unsecured loans and credit cards). This will help you prioritise the essential payments, like mortgage or rent, council tax, gas, electricity and housekeeping – our budget calculator will help with this process. From these calculations, you’ll know whether you can cover your essentials and other financial commitments.
If you don’t have enough money to cover the essentials, it’s time to seek professional advice. Our Money Advice and Guidance Service team can go through your options. So, don’t wait: get help today.
Many of us find that, even though we can cover our essential costs, we never have any money. January is a good time to review all your spending and decide whether to make any adjustments. This is vital for a healthy budget. Often, we don’t count things like a coffee on the way to work or the odd lunch out with friends. But, of course, these little things all add up and we can sometimes spend more than we’d budgeted for.
Tracking your spending
There are lots of ways to keep track of your spending. You could just use a pen and paper or a budgeting app, which can help you track your spending habits too. But keeping a spending diary is just as effective as an app. We have a handy spending diary which you can download and open using Adobe Acrobat Reader to easily calculate your weekly costs. Or simply print it off if you prefer to write things down.
Using multiple bank accounts or ‘piggy banking’ is a popular way to track spending. This involves using bank accounts as funding pots for bills, savings, Christmas and holidays. You transfer funds from your main account, by standing order, to these different accounts to cover essential expenditure and the things you want to save for. In this way, you always have an accurate picture of your available funds. You see instantly whether you are on track with your savings.
You could keep your funds for bills in your current account and use savings accounts for other funds – making it a little harder to access this money!
If you have multiple accounts, you may find a budgeting app useful. There are free and paid-for options – offering varying services.
All budgeting apps have to conform to ‘open banking’ regulations, which govern how banks manage your financial information. These rules only apply to online accounts and allow financial institutions to share your data amongst themselves.
The app provider can access all the details from your online accounts to give you a full analysis of your spending and provide appropriate financial services. You must give permission for any bank to share your data, but you should still consider the security of any app carefully. You’ll only be protected by your bank if you use an authorised company. So, check the FCA (Financial Conduct Authority) Register and the Open Banking Directory before signing up.
Good luck completing your budget. It couldn’t be a better start to the year and not only will it improve your financial wellbeing and help you keep track of your spending, it will also make you feel more in control and help to reduce stress.
Happy New Year and happy budgeting!