The new year is the ideal time to take stock of your finances and set yourself some money goals. From budgeting and making the most of higher savings rates through to checking your mortgage and credit score, here are nine new year money resolutions for 2023.
Build an emergency fund
With a recession predicted in 2023 and the cost of living crisis biting hard, taking steps to build a suitably sized emergency fund should be a priority for most of us this year.
Ideally, you’ll have a fund capable of covering at least three months’ worth of expenses, but just having something set aside is better than nothing.
As you’ll probably need the option to get your hands on this money fast if it’s needed, an easy access account is usually a good home for these rainy day funds.
“Saving even £20 each month builds up over time, and you can always increase the amount if your circumstances change,” says Alice Guy, personal finance editor at investment platform interactive investor.
Clear your credit card debt
Paying off what you owe on credit cards should be a priority any time of the year, but when January comes your festive spending will be on your statements too. Ideally, you’d pay off your entire credit card balance at the end of each month and avoid interest charges altogether. However if this isn’t realistic, at the very least you should always make the minimum payment on your credit card bill.
“It’s really important that you keep up repayments on any credit cards, as late or missed payments can have a negative impact on your credit score,” explains Kelli Fielding, managing director of consumer interactive at credit reference agency TransUnion. “If your balance is high, ensure regular monthly payments are made and try to pay more than the minimum when you can.”
If you’re serious about paying off your credit card debt quickly, you’ll need to pay above the minimum amount. And if you’re paying a high interest rate on your card, you could consider switching to a 0% balance transfer card to give yourself time to clear what you owe without accumulating any more interest. Be aware that there is often a transfer fee for moving the balance from one card to another.
Make the most of higher savings rates
A rising Bank of England base rate has led to savings rates improving throughout the past year, with the returns on some savings accounts reaching highs not seen for at least a decade.
So whether you’re about to start saving, or already have funds that have been in accounts paying next to nothing, now’s the time to look around for the best savings rates, and get your money working hard for you.
To avoid the risk of dipping into your emergency funds, it’s best to keep the money you save in general separate. This might be in another easy access account, a fixed rate bond, a cash ISA, or even a combination of accounts.
“It’s worth shopping around for the best savings rates as they vary significantly between lenders,” points out Alice Guy. “Fixed rate accounts, where you lock your money away for a while, often offer better rates. But don’t forget it’s important to be able to access some savings straight away for emergencies.”
Improve your credit score
Regardless of the year, it’s almost always going to be worth spending some time trying to improve your credit score. A good credit score can be crucial in accessing the best loans, mortgages and credit cards, so making sure it is up to scratch is likely to save you money in the long term.
“The more that you can demonstrate that you are able to manage the credit you’ve had in the past, have met your repayments on time and are living within your means, the more positively a lender is likely to consider your credit application,” says Paula Roche, managing director at credit reference agency Equifax UK.
Making sure you keep a close eye on your credit report and score is the advice offered up by Kelli Fielding, as this will give you a clear understanding of where you are credit wise. “Then you can take steps to improve your position over time if necessary,” she adds. “For example, ensure you’re on the electoral register, pay bills on time or early if possible, avoid making multiple applications for credit in a short space of time and regularly check your credit report to make sure all the information is up-to-date.”
» MORE: How to improve your credit score
Work out a budget
The cost of living crisis and rising inflation will be affecting everyone to different degrees, so if you haven’t already got one, now’s the time to create a personal budget. Tracking how much money you have coming into your household and where you are keeping it is vital if you want to take control of your finances.
You might want to write everything down on a piece of paper, set up a simple spreadsheet or download a budgeting app to your phone. But once you can actually see your income and expenditure side-by-side, it’s far easier to identify where you might be overspending. It will also help with working out how much you would normally have left over each month to perhaps put into savings or a pension, or overpay on your mortgage.
“Start off by working out your regular commitments and then see what you have left for discretionary spending,” suggests Alice Guy. “Don’t forget annual costs, like Christmas or holidays, as saving for them throughout the year could save a financial headache later on.”
» MORE: Learn how to budget
Check your mortgage
With September’s mini-budget causing mortgage rates to spike to levels not seen since 2008, securing a good mortgage deal suddenly became a lot more challenging.
Rates may have dropped back slightly since, but if you have a mortgage that is due to end this year, it’s vital that you shop around and compare the options that are available. You’re likely to see higher mortgage rates than what you’re paying now, but it could still be lower than your lender’s standard variable rate, which is what you’ll move onto if you don’t remortgage to a new deal.
“Deciding when to remortgage, and which deal to go for, has rarely been more important than it is right now,” says Paula Roche. “Interest rates on mortgage products rose dramatically in 2022, and nobody can say with any certainty where they will be in six months’ time. It can be tempting to put off big financial decisions like this, but the ‘head in the sand’ approach can end up costing thousands in the longer term, so it’s always worth facing up to reality as soon as possible.”
A new mortgage deal can often be arranged around six months before your current one ends. And a few months ahead of that, it’s also a good idea to check your credit report and score to make sure you’re ‘remortgage ready’.
“Being able to demonstrate good financial responsibility over a number of months and years will improve your access to the best rates, and ultimately leave you with more choice,” adds Roche.
Save for your retirement
The passing of another year means you’re also one year closer to retirement. If you’re of an age where the time left until you retire is less than the time you’ve already spent at work, hopefully you’ll have a pension in place and are on track to achieve your retirement goals – if you’re not, you could think about boosting your pension.
When you’re much younger, it can be hard to think about plans so far ahead, but it’s vital to start saving into a pension as soon as you can. This could be through a private pension that you set up for yourself, or perhaps better still, through a scheme that your employer might offer.
“Using a workplace pension is a great way to save for retirement,” says Alice Guy. “Your savings are topped up by the taxman and by your employer making pension saving incredibly good value. Even small contributions mount up over time and you’ll also benefit from stock market growth, which tends to beat cash in the long run.”
Higher inflation means the real value of the money we have in our pockets is falling. So when you’re buying something, taking the time to shop around to find the biggest savings is a must.
Whether you’re doing the weekly grocery shop, need new shoes or are about to buy a sofa, don’t simply settle on the first option you see, look around to check if it’s cheaper elsewhere.
The same most definitely applies when it’s time to renew things such as your home insurance or car insurance as well.
“Shopping around for deals is a great way to save money on our spending,” says Alice Guy. “It can also help to have a “spending list” to note down things you might need during the next few months. This can help us plan and save for bigger items and resist impulse purchases.”
Investing provides the opportunity for you to potentially enjoy a higher return on your money than if it’s held in a savings account, particularly if you invest over the long term.
However, the key word here is “opportunity”, as there can be no guarantees that the value of any investment will rise – indeed, you need to be aware that the value of investments can fall, and you could lose money if things don’t go right.
If you’re comfortable with this risk, and how investing works, a stocks and shares ISA might be an option to explore first. If you’re not sure if investing is right for you, it’s a good idea to talk to a financial adviser about your options before you dive in.
“Investing is one of the best ways to build your long-term wealth,” says Alice Guy. “That’s because the stock market tends to grow more than cash over time and is usually the best way to beat inflation in the long run.”
» MORE: Beginners’ guide to investing
WARNING: We cannot tell you if any form of investing is right for you. Depending on your choice of investment your capital can be at risk and you may get back less than originally paid in.
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