With the New Year in full swing, it is time to come to terms with New Year money. Whether you spent a lot last year, or if you are planning for big things this year, you need to start the New Year well with good money management.
Managing the January financial hangover
January is a month where many of us don’t have a lot of cash spare to pay for bills and utilities. Whether you have to pay for your children this month or pay for your car to get fixed, bills never go away. Water and gas bills also account for much of our monthly expenditure. According to UK Power, the cheapest monthly electricity bill for a small house could be as high as £55. The Guardian also suggested that the yearly average water bill could exceed the £400 mark in 2015. All these projected increases in bills, coupled with rent and mortgage payments can make January one tough month. If we are not careful, we might find ourselves deeper into debt and struggling to maintain our day to day expenses.
Come up with a budget
As easy as this may sound, making a budget for January and February is the only way to make the year start off right. Top things you need to include in your early year budget:
- New clothes – this is particularly important if you are starting a new job
- New phone – if you need one that is physically better than your current phone
- Current bills – staying on top of your bills has to be a top priority
- New bill providers – you might have switched to a new provider and in which case this means you will have new bills to pay
- Paying down debts – many Britons will be focusing on paying down debts with their January salaries
A budget allows you to decide how much you want to spend. Planning ahead is always safe and gives you an idea of how much percentage of your earnings will go towards your bills and other things that need to be paid for. You have to work in the boundaries of your budget.
Cut back on unnecessary spending
There are many ways that Britons love to indulge and splash their cash. Here are some of the most popular options for us as seen by how we spend money:
- Package holidays to fun locations such as the Costa del Sol
- British staycations at the Cotswolds
- Theme park day outs at Alton Towers or Blackpool Pleasure Beach
- Going out to bars
- Eating out
- Coffees at cafes
If you are ever tempted to take part in unnecessary spending above especially when times are tight in January, you need to cut back on this spending. If you eat out every day, you should be minimising eating out to once a week or ideally cooking from home every day. Many of us love to have a decadent coffee on the way to work but these tend to be expensive daily indulgences. In this example, you should consider making tea or coffee at home and carrying it in a thermos to the office. This is not as glamorous but it is easier on your wallet. This means changing your current habits and taking it easy on things that you like to do in order to survive the tough financial month of January. What is the top thing that you will cut back spending on in order to save money on this month?
Loans, Debt and Borrowing
You have a backlog of bills that are unpaid this January. Most, if not all of your savings have been depleted during the festive period. You still owe money and you need to manage this. For most of us, the easy way out of this is to borrow more money. Before borrowing money, the following tips will help our readers to make up their minds:
- Do you really have to buy that item on sale?
Some of us tend to borrow money because we have seen a couple of goods on sale this January that we really need but cannot afford right now. But before we borrow any money for shopping, perhaps it is wise to ask ourselves, do we really need that item right now? Could we wait until some other time when we can afford it? Manage your finances by making wise decisions. If we can live without the item on sale, perhaps it is unwise to borrow money just so we could have it. Try to see if it is available in second-hand or maybe exchange or substitute it with another item that you already have.
- I want to borrow money this January, what factors should I consider?
It is important to look at how much you can afford to pay back on your loan every month. This will help you decide on which borrowing option to choose. It is also wise to be very realistic on these monthly payments because they will be part of you for the next year or more. Take into consideration things like water, electricity and fuel bills that could go up because of factors outside of your control. If these bills went up, would you still manage to repay the loan on a monthly basis?
It is important to compare between different loans deals, looking at how much the interest rate is, your cost per month, how much will you pay back in total and what are the penalties for late or missed payments. Answering such questions is important as you will be able to decide on how much you borrow to cover your expenses this month.
You should also think about what kind of loan that you want to take out. Payday loans suit people who are working and get paid every month because by the time you receive your loan, you just have to wait to get paid in order to repay it.
- Avoid late payment charges in the New Year
When your loan’s due date passes you run the risk of encountering late payment fees. The fees vary in how much they are depending on which lender you have borrowed from. Late payments also lower your credit rating. Make it a habit this month and coming months to make your loan payments before the due date. Make a budget that will allow you to meet such payments whilst taking into account factors that are not within your control, as we saw previous tips.
Seeing how January has loads of expenses, it is quite important for this month to save as much money as you can. Unnecessary spending has to be avoided at all costs. We have shown our customers on how to cut their costs by planning ahead through coming up with a budget, avoiding to buy things that are on sale. Customers have also been exposed to how and when to borrow money and which factors to consider before borrowing. We also saw how we could save money from our credit cards by avoiding unnecessary charges.
January might, at times, also feel like a holiday because some of us are still on holidays from school and work. We might get tempted to carry forward the shopping fever to January and keep spending by going to the mall, or going out at night with friends. However, if you are struggling with your finances this month, it might be a good idea to avoid going out at night or visit the shopping malls regularly. This could save you £50 at the end of the month.
How to take the headache out of New Year finances
The key thing about managing your finances in the New Year is to take a measured approach to credit, only borrow what you can afford to repay, minimise spending and start saving as much as you can. By taking control of your personal finances for this year, you are making it easier to be in a better position to improve on your finances such as by making your credit rating better and being able to apply for a mortgage. How do you plan to handle New Year finances?