Money tips: Five steps to refresh your finances in the New Year

·5 min read
Money tips: Five steps to refresh your finances in the New Year
Save more and spend less in 2022 with these handy tips. Photo: Getty

Start the New Year with a fresh set of finances by taking these steps to spend less and save more.

Set a budget

All good bookkeeping starts with budgeting. Begin by calculating your monthly income and how much money you need to cover the essentials such as bills, food and travel. Any remaining funds should be split between an accessible disposable income pot and savings.

Set aside a realistic amount for all non-essential spending such as clothing, social events and entertainment and leave this money in your current account. Stick to this budget and don’t overspend.

Set up a regular standing order which automatically moves a fixed amount from your current account to an ISA or savings account just after pay day each month.

Using an app can also help with cash flow management. You Need a Budget is a great app for those on a tight budget, whilst Good Budget is great for beginners. The Monzo banking app is especially useful for setting up different savings pots and seeing your progress on reaching your target.

Cancel and switch

Did you find yourself signing up to multiple streaming channels and subscription boxes during the pandemic? Then it is probably time to review of all of your subscriptions and scrutinise your direct debits.

Do you really need a monthly sock delivery and subscription to Netflix (NFLX), Amazon Prime (AMZN) and Disney Plus (DIS)? Try to cut back on 50% of subscriptions and redirect the money into a savings account.

Read more: Gas and electricity bills: Will an energy smart meter actually save you money?

Also don’t let your insurances and annual contracts auto renew. Instead take the time to shop around for a better deal and make the switch. Although there is little to gain from switching energy supplier at the moment due to the ongoing energy crisis, considerable savings can be made on home broadband, SIM only mobile phone contracts, and car insurance.

It is important to have at least three months’ salary saved to cover emergencies such as a broken boiler, injury meaning you cannot work or any unforeseen costs, so any savings made from switching can top up this fund.

Get a Lifetime ISA

Interest rates remain historically low and easy access accounts will give you virtually no return on your money, with most starting around 0.75%.

Some fixed savings accounts, where your money is locked in for a certain number of years, give a slightly higher rate of return of up to 2.05%.

If you are aged between 18 and 40 the best place to save money for a house deposit or retirement is a Lifetime ISA which will give you a 25% tax relief boost. You can deposit up to £4,000 ($5,298) a year and the government tops this up with a 25% bonus. Over 10 years if you save £40,000 you will receive £10,000 additional funds meaning you have a total of £50,000.

Read more: How to save for your first home

A Lifetime ISA can be opened as a cash ISA through financial institutions such as Skipton Building Society or invested on the stock market through platforms like AJ Bell.

The caveat is that the money including the bonus can only be withdrawn at the age of 60 or as a deposit for a first time buyer and you can only deposit funds into the ISA until the age of 50. If you withdraw for any other reason you lose the 25% bonus.

Sign up to Money Box

This handy award-winning app rounds up your spending to the nearest pound and funnels the spare pennies into savings which can then be left as cash or invested.

It connects with a wide range of current accounts enabling round-ups from high street banks like Lloyds (LLOY.L), HSBC (HSBA.L) and Barclays (BARC.L) as well as challenger banks like Monzo and Starling.

You can choose from a range of accounts including Lifetime ISAs, stocks and shares ISAs, savings accounts, Junior ISA or a personal pension. As well as round-ups you can set up a regular weekly deposit, a monthly payday boost or make one-off payments.

The app has lots of tools for calculating your savings plus handy information on consolidating pensions and mortgage advice. You can also earn rewards direct into your account with more than 70 retailers.

It is regulated by the Financial Conduct Authority meaning your money is protected.

Download the Mint App

This free money management app enables you to create customised budgets, track your spending and monitor your subscriptions. It is easy to add cash, credit cards, investments and bills so you can review everything all in one place.

Read more: How much money do I need to retire comfortably?

It gives overdraft protection alerts and tracks bills to make sure you never miss a due date and tells you when subscription costs increase. Another great feature is access to your credit score and notifications if there are any changes on your report.

Once your monthly budget is set, your bills and subscriptions are reviewed and your savings are set up, you can connect everything to your Mint app to keep on top of your financial picture.

Watch: How to prevent getting into debt

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