As more people face the cost-of-living crisis, our experts show you how to make sensible financial plans for 2023, including investing as well as saving, using tax allowances like ISAs, and making the most of high interest rates on accounts.
As the bells ring to welcome in a new year, many of us will be feeling nervous about the financial challenges ahead. With inflation still running at over 10%, and high energy bills adding to financial pressures, we should all put money management at the heart of our New Year’s resolutions.
The good news is that we are more likely to keep resolutions concerning our money than we are to stick to our resolve when it comes to diet or exercise. Almost a third of those (29%) who made money-related resolutions at the beginning of 2022 are still keeping them, compared with under a quarter of those who resolved to improve fitness or wellbeing.
Sam North, analyst from trading site eToro, which carried out this resolutions research, says the British public are planning to make more money-related resolutions this year than any other type.
“Brits are planning to fight back by improving the way they manage their money, rather than burying their head in the sand,” he says.
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Here are some finance-related goals that could really make a difference to your year.
1. Resolve to: build a savings pot
Building savings is hard when times are tough, but resolving to automate the process will help you on your way.
Financial coach Philly Ponniah suggests enabling the ‘round up’ feature available in many banking apps. These features round up each spend to your nearest pound and put the difference into a savings account. You can choose to multiply the savings you put away as well, Ponniah says, allowing your pot to grow quickly without you noticing.
“I’ve personally saved £830 doing this two times rounding in the last six months,” she says.
Ponniah also suggests saving money as soon as you get it, in a separate savings account.
“Set up a direct debit after pay day to automate savings. When you can’t see it in your current account, you’re less likely to spend it,” she says.
2. Resolve to: chase the best rates
Interest rates have risen – something we are all aware of if we have mortgages or debts to pay. However, it is good news for savers, as interest rates on the money we put away for later are also rising. “A resolution to bear in mind for 2023 should be to maximise on rising interest rates. Things are changing fast,” says Rajan Lakhani at savings app Plum.
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Setting aside an hour to find the best home for your cash savings could pay handsomely over the year, especially if they’re currently languishing in a lowly paid account. Try financial data provider Moneyfacts to search for the best rates for easy-access and fixed rate savings.
3. Resolve to: keep learning
Many of us find money management daunting, and there’s little financial education on the school curriculum. Resolving to learn about how best to manage your money, whether you are wondering about investment or how to pay down debt, will help you to become financially stronger.
“Read books and blogs, listen to podcasts, and attend seminars. This will help you stay up to date on financial trends, and make the most of the investments you make,” says Tommy Gallagher, founder of digital banking site Top Mobile Banks.
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There is a wealth of financial education resources available on the internet. The Government’s Money Helper site is a good place to start for many household topics, while subscribing to newsletters such as Martin Lewis’s weekly Money Tips email can also help to keep you on top of your finances. For investment education, try the Times Money Mentor free online investment course
4. Resolve to: tackle existing debt
Debt, whether on a credit card, a loan or an overdraft, can seriously impact your financial health. Even if you are making repayments on it, the interest can be very high, making it harder to be financially fit.
Tackling debt head on is one of the most important resolutions you can make. Use an interest-free or low-interest credit card to give you a window to pay back what you owe.
The type of card you can get will depend on your credit rating, but you could get over two years without paying interest, though you may have to pay a percentage of the balance as a fee to make the transfer.
“Set up an affordable monthly direct debit to chip away at the debit and reduce the balance over time. If you are brave, cut up the card so you are not tempted to spend,” suggests Jessica Ayres, financial adviser at Timothy James & Partners.
If you are really struggling with debt, you can get help at Citizens Advice or registered charity Stepchange.
5. Resolve to: tame your spending
Financial coach Ponniah says adding ‘friction’ to your spending can help with a resolution to spend less in 2023.
“Take your bank details off apps like Uber Eats, eBay and Amazon – so that you have to get your card to input the details,” she advises. “This cuts easy spending. Remove Google or Apple Pay from your phone for the same reason. This adds friction to buying – making you reconsider.”
Many uncertainties lie ahead in 2023, but with these five resolutions in hand, you and your finances can at least face it head-on.
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