December is drawing to a close, but it’s an expensive time of year.
How did your finances fare in 2019 and what’s your financial forecast for 2020?
It’s helpful to get a head-start when it comes to managing your money for the year ahead. Planning your budgets, goals and assessing the way you manage your finances will help you recover from any festive financial excesses and improve your financial outlook for 2020. Schedule some time to take an audit of your finances, and, more importantly, how your financial situation translates to your personal goals.
Most people reset on the 1st of January after the festivities are over and the harsh reality of the long January month sets in. So it’s a good time to review your spending habits and priorities. You can do this with a budgeting tool, or you could try using one of the new money management apps. Either way, make sure you review your spending with your financial goals firmly in focus.
Assess your situation
This is the time to reflect upon how you spent your money in 2018. If you don’t already track your spending, you might need to look back at your bank statements and sort your monthly expenses into categories:
Decide what you needed to spend and separate this figure from what you have spent. Categorise your spending by importance; have you spent your money in a less-important area that could’ve otherwise contributed to your savings? Why is this the case and how could you avoid this in 2019?
Make some changes
Now you’ve got a picture of how you chose to spend your money in 2018, you can make realistic changes to your money routines to reflect new spending priorities for the coming year. These changes will help you realise your goals, whether they are to save more, to avoid or pay off debt, or plan for that long-haul trip.
Possibly the most important, and most difficult, question to ask yourself in this process is ‘What do I want?’ You’ll probably find that you have some short terms goals, and longer terms goals too. Some of your goals could be achieved in the next year, and some might take a few years….but the first step is putting some plans in place.
And every change starts with a first step.
Start by making yourself a weekly budget and make small changes such as taking a packed lunch or giving up your daily takeaway coffee before work. The important thing is to change something and track that change. The money that you save should be kept in a separate savings account, or, if you’d like to see in detail how much progress you’re making, you can opt to use a money management tool.
Try a money app
The use of apps to manage your outgoings is becoming increasingly popular. Apps like Yolt or Monzo Bank come with detailed reporting and analysis of where your money goes. They can provide data-driven financial advice and even round up totals and invest your change.
However, in order to benefit from these features, you need to provide these companies with your financial data. This can feel quite uncomfortable, especially as these companies are new and aren’t linked to trusted partners like banks.
Fortunately, this is set to change in January, as UK financial institutions will be required to adopt a new framework known as ‘Open Banking’.
This means that banks (with your permission) can share your data with third parties. Apps that want to access your data must be registered with the Financial Conduct Authority (FCA), the industry regulator. These third parties will be listed on the Financial Services Register. Companies that are registered with the FCA give consumers have certain protections, such as access to an independent complaints service if things go wrong.
With careful budgeting you can make some real changes to your financial outlook both for the short and long term – so why not give it a try?
About the author
Alison Pask, Managing Director of Financial Capability and Community Outreach at The London Institute of Banking & Finance, a registered charity and leading provider of financial education in schools and at under-graduate and post-graduate level. It’s also an awarding body for professional qualifications in the sector.