What are your New Year Resolutions for 2019? Ones about money are common – how to save more, clear debts, improve your credit record etc.
Some people scoff these resolutions. But it’s a good idea to take a step back once a year and ask yourself what you would like to change in the next year. If you know where you want to get to, there is a better chance you will end up there!
Though you do need to translate some of your targets into actions of course… so here are some of the common resolutions I hear, with a few practical tips to make them easier to achieve in 2019.
Tackle a specific debt
“Pay off a couple of my credit cards”
First decide which card to target first. It could be the one with the highest APR – doing that will reduce the interest you pay. Or you could go for the smallest one – that way you get a success sooner and can then go for the next one.
Whichever you do, pick one and go for it, rather than hoping they will all go down a bit and one will get paid off!
The second tip is to avoid “the waterbed effect”, where you push down hard on one card balance but other debts go up. Make a list of all your debts, including your overdraft, and check them each month to make sure this isn’t happening.
“Clear my catalogue debts, but it’s hard to pay more than the minimums”
These are probably at really high rates of interest. One reader said recently: “My Simply Be balance is £983, the monthly interest is £35.64 and my monthly payment is £39.33” so she is paying off less than £4 a month.
One way is to set up a standing order for just a bit more than the current minimum. For that reader it could be £40, or stretch a bit to £42 or even £45. It isn’t much more, but by paying the same every month you avoid the minimum credit card payment trap and pay it faster. A lot faster – you can take many years of the time to clear a balance.
Of course, you do have to stop using the accounts!
“Get rid of my overdraft”
Many people find overdrafts the hardest debt to clear. The simplest approach is often to get a new bank account without an overdraft and then just pay a set amount off the old overdraft each month like repaying a loan.
Sounds like overkill? See how you get on with clearing it… if you haven’t made any progress by April, it’s time to switch.
“Pay 5k off my mortgage”
If your fixed rate has ended, or will soon, remortgaging could help you meet this target.
Otherwise the only way you will meet this target is by paying an extra £420 a month. If your pay doesn’t vary much, set up an extra standing order for that to go out the day you get paid. You can always cancel or reduce it if you have been too ambitious.
If your pay varies a lot, you could decide on a “minimum” level and every month pay over any extra you earn over and above the minimum. (Don’t forget about putting money away for tax though, if you are self-employed.)
“Don’t buy more stuff I don’t need”
This can easily slip into the “road to hell is paved with good intentions” category. Avoid this by thinking where your weak spots are and aim for those:
- for food shopping, make a meal list and a shopping list from it once a week. Switch to online shopping if you get easily distracted.
- how about “no new clothes for adults for 6 months” as a target?
- print out Martin Lewis’s Money Mantras card and slip it into your wallet.
- if you tend to browse online while watching TV, look at these 5 ideas to spend less online.
“Improve my credit score and recover from the poor decisions when I was younger”
Unless there is an error on your credit records (default date too late? a debt you don’t recognise?) the key to improving your credit score is usually just plodding on, making more than the minimum payments to your cards, reducing the amount you owe, getting out of your overdraft and never, ever missing a payment to anything.
“Take no cards out with me and just £x in cash for the week”
For years people were saying it is easier to budget with cash. This has now been reinforced by contactless cards making it so much simpler to pay that you may not even notice what the amount is. If your budget feels out of control, this one is well worth a try.
But also have a look at Apps that help you budget to see if a hi-tech solution could also help you – the more you know where your money is going, the easier it is to decide what you want to change.
“Get a small emergency fund”
Great ambition, especially if you have problem debt. Without a small emergency, fund life is just one damn thing after another. But finding the money can be very hard.
You could look at the new Help To Save scheme if you are on Universal Credit or Working Tax Credit. It’s a very good interest rate and you can pay in different amounts each month. But you still have to find the money…
I have done a roundup of 6 ways to save – different ones work better for different people, so have a look and try one out.
“Save up for Christmas this year”
Don’t sign up with Park! Savings clubs are not regulated, your money is not protected and there is no compensation form the FSCS if they go bust. Farepak went under in 2006 and 150,000 customers had Christmas ruined. The law has not been changed since Farepak, the fancy words on Park’s website do not add up to proper protection for your money. At the end of 2018, the government started a consultation on what could be changed, but that isn’t going to be live for this year.
Some credit unions have specific Xmas savings schemes you might like. There your savings are protected, like they are in a bank or building society.
Or look at a “save the change” challenge such as this one, aiming to save 1p the first day, 2p the second, 3p the third. That adds up to over £650 a year but the key is to use what is left in your purse every day, so £2.67 in change now can cross off Day 267 even though that is months ahead. This way the first months aren’t trivial and the last months impossible.
“Be on track for a house deposit saved by next summer”
Another big target you will probably only reach if you pay the money into a savings account (or a LISA if that will work for you) as soon as you get paid. Wait until the end of the month and it can get frittered away.
Can I add a resolution?
If you really have debt problems, do yourself the biggest favour and get some good debt advice. The sooner you do this, the more options you have, but it’s never too late! See good places for debt advice for where to go.