12 min read

Seven ways to prepare your finances for the new year

Woman working out her finances on a calculator and making notes

Here are seven ideas you could implement to get your finances ready for a brand new year.

Ramp up your savings habit

Even just putting a few pounds aside each month can help you build a regular savings habit.

If you have savings with your bank and they are earning a pitiful interest rate, consider moving your money somewhere where it can work a bit harder. This might be a fixed rate bond where you get a better rate if you lock your money away for a couple of years, or it might be an ISA where any gains you make are protected from the tax man (although bear in mind the tax relief on products can change and varies depending on your individual circumstances).

Investing your money could give a better return over the long term compared to cash, for example through a Stocks & Shares ISA, but this should not replace your cash emergency fund. Money that is invested is not easily accessible, and it’s generally accepted that investments in stocks and shares should be tied up for at least a few years. Be aware that market fluctuations mean you could get back less than you put in. Weigh up what you’re saving or investing for and when you will need to access your money before making any final decisions.

Check your credit report

It’s free to access your credit file, and it’s good to know what yours says about you. Check it periodically to make sure there are no errors on it such as disputed late payments or incorrect linked addresses.

Mistakes could affect your access to the best deals if you ever want to take on new borrowing. They could even make it difficult for you to access services which require a credit check, such as utilities, insurance, or a mobile phone contract.

Pay down debt

As you assess your financial priorities for 2018, dealing with debt might be among them. This might mean making a long-term plan to pay down high levels of borrowing. If this is the case for you, budgeting will help you work out where you can cut back in order to throw more money at your debts.

If your credit history is decent, you could consider switching as much of your debt as you can to a credit card offering 0% interest on balance transfers and make a plan to pay it off before the interest free period ends. For this strategy to work, you must cancel the credit card from which you are transferring and cut it up to prevent further spending.

You can’t borrow your way out of a debt problem, and you should think carefully before taking out any kind of credit card. If you are struggling with debt, make one of the free debt charities such as StepChange your first port of call.

Use a pensions calculator

While you’re doing a financial overhaul, casting an appraising eye over your retirement provision is essential, especially if you are aged over 50.

If you have a pension, review it regularly and make sure you are getting any employer contributions to which you’re entitled, this should help your pot deliver the income you will need. Using one of the many free pensions calculators available online will give you a clearer picture.

You should also make sure you are investing appropriately for your age and life stage, and your attitude to risk. A professional financial adviser can help you answer these questions, but they will charge a fee for their services.

Budget for annual expenses – especially Christmas

There’s no excuse for being surprised by the cost of an annual event like Christmas – after all, it happens at the same time every year. The problem comes when you don’t plan ahead.

Work out how much you typically spend at Christmas and divide that number by 12. That’s how much you need to put aside every month, starting in January, so you’ll be ready when the time comes.

Apply the same principle to your summer holiday, birthdays, your car MOT or insurance renewal. Any big expense that happens every year is something you should think about budgeting for, or you may find that overdraft creeping up on you.

When planning for Christmas, make the most of any loyalty points you may have saved up through the year. The points on your supermarket loyalty cards can help you bring down the sizeable cost of food for the festive season.

Cancel old direct debits

Are you still paying for a magazine subscription that’s being delivered to your old house? Are you forking out for TV channels you don’t use?

Organise your direct debits and standing orders by looking carefully at what all your monthly payments are for and weeding out any that are wasteful, but be sure to cancel any contracts such as gym memberships by getting in touch with the provider first. If you just cancel the direct debit at your end, as you may still be liable for the payments and could end up incurring late fees or early cancellation charges.

Ditch and switch to utility companies that suit you

Cast an eye over all your utility companies, your bank, insurance company, phone and internet provider.

Are you on the best possible deal, or would you be better off switching? These days it’s usually a quick and hassle-free process. However, you may be charged to exit a fixed term contract early so, if you can’t switch just yet, make a note of when your contract ends so you can come back to it at the right time.

Spending an afternoon scouring the best buy tables and ringing your providers to see if they can offer you a comparable deal is a great investment in a money saving new year.

Written by Hannah Smith – Financial Journalist

Note: Whilst we take care to ensure Talking Finance content is accurate at the time of publication, individual circumstances can differ so please don’t rely on it when making financial decisions.