How to save and spend:
Christmas is over for another year – and right now, your bank balance may be looking worn-out after all that festive spending.
In fact, many people will be wondering how they’re going to stretch what’s left until their next payday.
But while it may feel like we’re doomed to repeat the same spending patterns year after year, 2019 could be the one when everything changes.
Here, Sarah Coles, personal finance analyst at Hargreaves Lansdown (hl. co.uk), suggests 10 steps to get your spending back on track...
1. Start a spending diary
Most of us find it difficult to work out where our money is going. Keep a spending diary for a few weeks.
Mark each expense as essentials you can’t live without or luxury spending. Keep a notebook handy, or use an app.
2. Shop around for essentials
You can’t cut out essentials like utility bills but you can reduce costs by shopping around. You can shave hundreds of pounds off annual bills.
3. Cut out luxuries
Your morning takeaway coffee, Friday-night drinks or Saturday takeaways aren’t essential.
If cutting them out feels painful, bear in mind that by ditching your morning coffee, or only going out every other Friday, you can save enough cash for something else fun – such as a holiday.
4. Pay off debts
When you’ve cut your costs, prioritise paying off any expensive debts.
Hargreaves Lansdown’s research shows that of those people who set a budget for Christmas, 57% of them spend more than they budgeted for.
More than one in 10 who set a Christmas budget bust it by at least £300.
Sticking with minimum repayments will mean your spending mistakes haunt you for months so commit to making regular monthly repayments.
5. Manage debt wisely
You can’t pay it off overnight so make sure you’re not spending a fortune on your borrowing in the interim.
Figures show more than one in 10 people pay for their festive overspend by dipping into their overdraft – which can be an expensive way to borrow.
Switch to the cheapest possible method of borrowing so repayments are paying debt off rather than servicing it.
6. Don’t use credit limits as an excuse to keep spending
If you get a new low-interest loan or credit card, it’s tempting to take advantage of your full credit limit but this simply means running up more debt. If you’re going to get back on track this year, fight the temptation.
7. Build a cash savings safety net Once you have paid off any expensive debts, build up three to six months’ worth of expenses in an easy-access savings account for emergencies.
8. Ditch old savings accounts
If you already have savings, check the interest rate you’re earning and shop around for a better one.
9. Put financial dates in your calendar It pays to know when insurance policies are up for renewal so you can switch and save.
10. Don’t neglect the long-term
It’s important to revisit pensions and investments once a year, to see if you’re on track.