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There’s a sense that everyone is hungry for Christmas this year. What with all the political upheaval and unsettling events, the distraction of twinkly lights, mulled wine and presents is more than welcome. If you want to make sure that this positive goodwill continues into 2017 then focus on any areas of your life that aren’t quite up to scratch. For many of us, that’s budgeting and finances. With our 2017 budgeting tips you can make sure that you start next year as you mean to go on – with a strong plan and focused resolutions.
There is an argument that many of us overspend when we use plastic but not if we’re paying with cash. It often seems much more real to hand over actual money and that can help you to keep a tighter hold on your finances. If you have trouble with your spending then start the year on a cash diet. Pay for everything in cash and leave your cards at home for the first three months of the year. You’ll be able to reset any unhealthy habits and start 2017 with some super low spending.
Many of us only review our finances once a month. However, in 30/31 days there is a lot that can change or go wrong. Instead of relying on a once a month check up on your financial health, do it every day. You don’t need to go into great detail – just spend a couple of minutes a day going through transactions to make sure that nothing is amiss. This way you’ll catch issues early and you won’t find yourself at the end of the month with less than you expected.
Budgeting is all about making sure that you put the right amount of cash in the right place at the right time. Experts estimate that 20% of all your monthly income should go towards your financial goals. This could be saving for a property deposit or a pension. Perhaps you’re looking to pay off a personal loan or put aside cash for a holiday. Whatever your financial goals, if you’re funnelling 20% of your income towards them then you’ll get there sooner. The key is to make sure that you put aside the 20% as soon as the cash hits your account. That way you won’t be tempted to spend it on anything else.
If you’re following the 20% financial priorities rule then you might as well learn the rest of the equation too. 50% of your monthly income should be put towards your essential expenses, including rent or mortgage, utilities and food. The other 30% is for ‘lifestyle’ – i.e. the fun stuff. Take a good hard look at how you currently spend your income and if you’re doing it the wrong way round now is a great time to try and correct it.
Budgeting requires quite a lot of motivation – who wants to put aside 20% of income for ‘future goals’ when there’s an awesome pair of shoes on sale? Keeping yourself motivated will ensure that you stay on track with budgeting. You might want to use an app that will send you daily reminders of what your goals are and how much you’ve achieved, for example. Or you may want to draft a financial vision board that contains images that represent where you’re trying to get to financially. It can also help to have your own money mantra. For example, “is buying this a better choice than owning a home?” or “will buying this be better than going travelling next year?” Be your own personal financial trainer and stay motivated.
Money can be a great source of guilt for many of us. “I’ll never pay off my debts,” “I’m such a financial failure” and “I’ll never reach my money goals” are just a few of the kinds of toxic thoughts that can keep you stuck exactly where you are. Don’t be a self-fulfilling prophecy and stop thinking negatively about your ability to get where you want to be financially. Set realistic goals that you can actually achieve and start to feel positive about yourself as someone who is ‘good at budgeting.’ Celebrate it when you stick to your budget and give yourself a pat on the back for every step you take towards reaching your financial goals. You’ll be surprised just how much more you can achieve by tackling your budgeting with a positive mental attitude.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read about Alex Hartley
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