‘New Year, New Me’ is a phrase you’ll have no doubt heard ad nauseum in the past month, as the arrival of 2023 prompts millions across the nation to re-engage with goals and resolutions that serve to better their lives. Many choose to re-open gym memberships, or resolve to improve their diet – but this year, more than a few will be using the new year as an excuse to get a better grip on their finances. If that’s you, how can you do so effectively?
A solid start to any good financial plan is to set some tangible goals. It is all well and good that you want to maintain better control over your income and outgoings, but without a clear idea of what ‘success’ looks like, you might not get far at all. Think of it in terms of health and fitness, which are common fare for New Year’s resolutions; ‘I want to be fit’ is not a resolution conducive to results, whereas ‘I want to be able to run a mile in five minutes’ is a specific goal with a clear route forward.
Create a Budget
Whatever financial goals you settle on – be they saving a deposit for a home, maximising contributions to long-term savings or simply exiting your overdraft –, your next step is invariably to start thinking about budget. In order to make the changes necessary to serve your goal, you need to understand your own financial situation, and exactly what is feasible within it.
This can be done as vaguely or in-depth as you’d like. Ballpark monthly income and outgoings will give you a general understanding of your savings potential, while a deeper breakdown of your expenditure can highlight areas in which spending might be unnecessarily high.
Consider Financial Options
Alongside careful budgeting, good financial planning also emerges from the shrewd usage of financial products and services. For example, if you’re looking to save up for a deposit on a first home, the most effective route to doing so is through a LISA – which locks your money for use on a property or pension, but pays out a 25% government-backed bonus.
If you’re saving not for a property, but instead for retirement, then there is a whole host of other products and services available to you. As an over-55, you are eligible for equity release; equity release, sometimes known as a ‘lifetime mortgage’, allows homeowners to receive part of their home’s value in advance. Before you follow through with any such products, though, it is important to solicit advice from a professional to ensure you are making the right decision for you.
Check Your Credit Report
Lastly, an important point about your credit score. Credit scores are easily misunderstood, and can cause confusion amongst budgeters of all ages – to say nothing of the hurdles they can place between you and your goals. Your credit score is not a centralised figure, but rather a figure independently reached by one of three credit reference agencies.
Banks and lenders use information from these agencies to ascertain the risk customers might pose to them. The lower your credit score, the higher the risk and the less likely you are to be able to access certain products. Checking your credit score can be a great place to start if you intend to engage with loans or mortgages, and can also reveal identity fraud in your name in rare cases.