Following on from our Instagram Live at the end of January 2024 (recording on our YouTube page), we’re bringing you some quick tips that can help with getting your finances in order. Before you look ahead, it's good to review where you’ve been! So, in this post we’ll be giving you some tips for reflecting on your finances. This is more than just reviewing your earnings, and reaches into whether you can detail your spending, tax contributions and savings. Here are some of the things to consider when reflecting:
Review your 2023 Financial Goals
Take your mind back to the start of 2023, did you set any financial goals that year? Did you achieve them? If you did, that’s great! What were the habits that allowed you to meet those goals? If you didn’t, don’t get discouraged, what’s important is that you took steps to try achieving them. What things hindered your progress? Something that really helps with goal setting is ensuring they are SMART – Specific, Measurable, Achievable, Relevant, and Time-bound. For example, rather than just setting a goal of saving money, you could set a goal of having £4,000 saved up at the end of the year by putting away £400 each month into a specific bank account. Having a SMART goal makes it easier to keep track of where you are in relation to where you want to be.
Analyse your Spending Habits
What was your spending like in 2023? Specific? Excessive? Are there areas where you consistently overspent? In my case, I’ve found that subscription services can really add up, and really if I don’t make use of that 3rd streaming service more than once every couple of months, then it's something that may be worth cutting. It’s good to review your spending from the last year so you can find ways to optimise your budget. Many banking apps provide some sort of breakdown of your spending by category, so perhaps check if yours does so that you can begin analysing your spending.
Evaluate your Savings and Emergency Funds
Did you manage to grow your savings in 2023? Did you have to dip into your emergency fund? Emergency funds are money you’ve put away in an easy-access account just in case you quickly need a sum of cash to deal with one of life’s sudden downturns, job loss or broken household appliances for example. Generally, it’s recommended to amount to at least 3 months' worth of expenses at the low end. Be sure to review whether your emergency fund is enough to help you through a rough time, and if you can compromise your current expenditure to bolster it. Given current high interest rates available, there’s no reason why your emergency fund can’t be in a high interest-bearing account.
Dept is tough to think about, but it's worth actively confronting in order to reach financial freedom sooner. Try to review the various sources of dept in your life in the last year. Student loans? Mortgages? Personal loans? Credit cards? Were you able to reduce your dept in the past year? Something that can help with this is the snowball method. Here you pay off the smallest loans as quickly as possible. An alternative to this is the avalanche method, where you pay off your loans in order of interest rate and pay off the ones with the highest rate first.
Check your Credit Score
Have you checked your credit score recently? Having good credit is essential for finance mastery, from better interest rates on loans to qualifying for better credit card deals, there are several benefits to having a good credit score. When you do check yours, be sure to note it down and think over some of the factors that can positively impact your score, especially if it needs some boosting.
Check your Investment Performance
For those of us that have investments, such as Wealth8 customers, something always good to do is to review how those investments are performing. Where might you need to further invest, or to divest? Writing out your investment rationale can help you keep a clear mind as to whether your current investments still align with your reasoning and goals. Be sure to consider how diversified your investment portfolios are, and of course that you are using tax-efficient products like ISAs or JISAs.
Thanks for reading and be sure to keep an eye out for the next write-up in this series, on crafting your 2024 financial goals!
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