Sort your finances for 2024

A new year is an excellent time to assess your financial situation and set yourself up for success for the next 12 months. Whether you want to pay off debts, save more or invest for the future, here are some steps to get your finances in order in the new year. 

Take stock of your current financial situation

The first step is about getting an idea of where you stand financially to begin with. Calculate your total income - including salary, bonuses, freelance work, or any other sources. Then, list your expenses, categorising them into essentials like mortgage payments, rent, utilities, food and non-essentials like dining out or entertainment. Next calculate any debts you have. This should include any outstanding credit card debt, overdrafts or loans.  

Set yourself some financial goals

Having an idea of what you want to achieve with your finances during the year will determine how you go about it. Whether it's creating an emergency fund, paying off debts, saving for a specific purchase, or investing for the future, having clear objectives will guide your financial decisions. 

It doesn’t have to be one or the other. You may want to achieve a few of those, but you may also have one overarching goal, such as buying your first home, or paying for a wedding.

Budget, budget, budget!

When it comes to your finances, it all starts with a solid budget. Create a realistic budget based on your income and expenses. Consider using budgeting apps or spreadsheets to track your spending. Allocate funds for essential expenses first, then assign amounts for savings, investments, and non-essential spending. However, while creating a budget is relatively easy, sticking to it is a different matter. There will be times you may stray from it, especially when life throws unexpected expenses your way, but always aim to stay as close to the budget you’ve created. If you find that difficult regularly, it might mean that you’ll have to adjust the budget accordingly.

Review and cut unnecessary expenses

Analyse your expenses from the past year and identify areas where you can cut back. Cancel unused subscriptions, reduce eating out, and find cheaper alternatives for regular expenses. Even small cutbacks can significantly impact your overall savings.

Build an emergency fund

If you don’t already have one, it’s important to build an emergency fund that covers at least three to six months' worth of living expenses. You never know when things go wrong, and if you lose your job, or have to cover a large unanticipated expense, an emergency fund can give you the cushion you need. 

To do this, it helps to set up a separate savings account specifically for emergencies and contribute regularly until you reach your target. There are several types of savings accounts available, such as instant access and easy access savings accounts, cash ISAs, notice savings accounts, and fixed rate bonds.

Each type of account offers different interest rates, often depending on the amount of access you have to your money. It’s worth looking into each one to see which type suits your circumstances and savings goal.

Manage your debt

Debt can hang over like a dark cloud over your finances, but the truth is many of us need to take on some debt from time to time. The trick is making sure to manage that debt in the most efficient way possible without paying more in interest than you have to. 

If you have any credit card debt that you’re paying interest on, consider moving it to a balance transfer card with a 0% interest rate offer. Some cards right now are offering up to 29 months interest free, so you can pay off a balance without paying any interest, although you may have to pay a small fee for the transfer. 

If you have any other outstanding debts, such as an overdraft or loan, focus on paying them off strategically by prioritising payments to the debt with the highest interest rate.

Review and optimise your investments

If you have investments, review your investment portfolio to ensure it aligns with your risk tolerance and financial goals. Consider diversifying your investments across different asset classes to spread risk. Be aware that investing does put our capital at risk, so you may get back less than you originally invested. If you're unsure, seek advice from a financial advisor.

Update insurance coverage

Check your insurance policies, including health, home, auto, and life insurance. Ensure they provide adequate coverage for your current needs and consider adjustments if necessary

Plan for retirement

If you haven't started saving for retirement, there’s no time like the present. Contribute to workplace pension schemes or open a personal pension plan. Consider increasing contributions if possible, especially if your employer matches contributions.

Regularly review and adjust

Financial planning isn’t a one-time task, it requires regular reviews and adjustments. Set aside time each month to review your budget, track your spending, and assess your progress toward your financial goals. Make necessary adjustments to stay on track.

Seek professional advice if needed

If you're uncertain about certain financial matters or need guidance on complex issues, consider seeking advice from a financial planner or advisor. They can provide personalised guidance based on your specific situation.

By following these steps and staying committed to your financial goals, you can start the new year on the right foot and pave the way for a more secure financial future.

Remember, small changes can lead to significant improvements in your financial health. Stay disciplined, keep yourself informed and take proactive steps towards achieving your financial aspirations in the year ahead.