Getting back to normality in the new year can be hard - Christmas is over, there’s no more pigs in blankets and spending all day watching Home Alone in your pj’s.
However, it doesn’t have to be all doom and gloom- the new year can mark an exciting time, as it brings a fresh start with new opportunities and goals to be reached. Whether it’s starting that juice cleanse you’ve been putting off since October, cleaning out that junk drawer in the kitchen or buying the new car you’ve been dreaming about- the turn of the New Year is a great time to re-evaluate the previous one and plan out how to achieve your goals going forward in to 2021.
One activity that DAM finds extremely useful in helping to achieve those new year goals is creating a budget. Our Financial Advisors have put together some useful tips to help you get started:
Review your current situation
Taking a step back and looking at your current financial situation can prove useful. This means looking at everything in its entirety, from current accounts, credit cards, overdrafts and even the money you might be hiding under the mattress! We know this can be a daunting task as you might still be feeling the effects of Christmas on your bank account- however, it often acts as the motivation you need to get your finances in order.
Detail your incomings and outgoings
After this, we find it helpful to note down your monthly income and expenditures. This should be as detailed as possible and include all expenses like mortgage payments, car loans, household bills, petrol, gym memberships and even factor in a monthly amount for your caffeine addiction. Any outstanding debt that requires repayment should be factored in at this stage- be sure to priorities those with high interest rates and charges, as well as make note of any special birthdays or milestones you hope to celebrate this year.
You might find while doing this that your current monthly incomings and outgoings have reduced as a result of lockdown restrictions. However, try to account for when your ‘normal’ expenditures resume. Remember this is not set in stone- you can review this regularly and make adjustments based on any changes to your circumstances.
Identify any potential changes
Once you have detailed your monthly expenditures, it is useful to identify any potential surplus’ or shortfalls. To do so, ask yourself the question “am I spending more than I earn?” If the answer is no, you may wish to set aside some money into your savings- whether that be setting up regular contributions to an existing account or opening a new one- but remember, save within your means! If the answer to the question is yes, don’t panic- instead look for areas where you might be overspending. This may mean limiting the Saturday night takeaways for a while or cancelling that next day delivery membership on Asos. With overspending it is better to tackle the problem as soon as possible.