New Year, New Me?
Returning to reality after Christmas can be hard – Christmas is over, the festivities are over and getting the brain back into working mode can take some tim. However, it’s important to bare in mind that the New Year marks an exciting time as well – another year of exciting new opportunities ahead.
So whether you’re an optimistic individual, up at the crack of dawn on the 1st January to drink your fruit smoothie and embark on your first gym session of the New Year, or you choose instead to put the New Year off until the 2nd as an extra day in bed seems much more appealing, there’s no denying that the turn of the New Year offers a great opportunity to take some time out to re-evaluate the year that’s passed and prepare for the one that lies ahead.
One activity I find particularly beneficial in January is to help clients create a budget for the year:
Step one: Review your current situation
First and foremost, it’s important to note down your current financial situation in its entirety, from your current account through to any credit cards or loans. With Christmas having just passed, this may mean credit cards and overdrafts have been stretched more than usual. But rather than bury your head in the sand, and shred the credit card statements as soon as they come through the door, you should take the time to note down any debt you may have from the previous month. (Suddenly all those nights out and extra gifts don’t quite seem as worth it).
Don’t be alarmed when carrying out this task, you may even find that the simple task of noting down any debt you have can start to lift the weight, and provide that little bit more determination to sort your finances.
Step two: Budget for the months ahead
The next step is to make a list of your typical income and expenditure each month. This should include all expenses from mortgage payments, car loans, food and gas through to school fees, petrol and gym memberships.
At this stage, you should also factor in any debt that is required to be re-paid – be sure to prioritise those with high interest rates or charges, as well as factoring in any large birthdays, holidays or upcoming events you have for the year ahead. You may even want to begin putting some money aside for the summer holiday you’ve been counting down since returning to work after the Christmas break. Or if you’re really organised, why not start up a savings plan for next Christmas…
Step three: Identify a surplus or shortfall
Once you have identified all of your income and expenditure for each month, the third and final step involves calculating your surplus or shortfall for each month. If it’s a surplus, you may wish to set some more money aside for saving, making regular contributions to an existing account or through setting up a new one - from a cash /stocks and shares ISA through to a general investment accounts, the opportunities are endless.
On the other hand, if it’s a shortfall don’t panic. Instead, look for areas where you may be overspending or where further savings can be made. It’s important to tackle overspending as soon as possible, whether that be through limiting the amount of times you eat out each month, or cancelling that gym membership you haven’t used since 2017 – any little saving will help.