Whether you want to exercise more, stop smoking, or even learn a new skill, you probably know all too well how tricky it can be to stick to your new year resolutions.
This seems to be a common occurrence, too. A YouGov survey from 2020 found that only 26% of Brits that made new year resolutions kept all of their promises, with 48% stating they kept some, but not all, of the resolutions they made.
Perhaps unsurprisingly, 23% said they didn’t stick to any of their resolutions.
Financial new year resolutions could be beneficial if you want to take control of your money in 2023. This is especially true as healthy economic promises could positively affect your finances for the rest of the year.
So, if you’re feeling ready to commit to them, read on to discover five essential financial new year resolutions that could help you build a solid financial foundation for the year to come.
1. Shop around for a new mortgage deal months in advance if your current one is coming to an end
Reviewing your current mortgage deal at the start of the year could be the perfect time to do so, as it could leave you on a firm footing for the year ahead.
This is especially the case if your current deal is set to expire soon, as you don’t want to be left on your lender’s standard variable rate (SVR) for an extended period.
An SVR is the interest rate your lender will revert you to when your fixed-, tracker- or discounted variable-rate deal expires, and it is typically uncompetitive compared to other deals in the marketplace.
Unbiased reports that if you had a £100,000 mortgage on a two-year fixed-rate at 2% over a term of 25 years, and you then reverted to your lender’s SVR of 4% when your deal expired, your monthly repayments would rise from £424 to £528.
If you’re struggling to find a new deal, it may be wise to speak with a mortgage broker. After all, aside from alleviating some of the stress from scouring the internet for a new deal, mortgage brokers also have access to many deals that generally aren’t available directly to individuals.
2. Create an emergency fund or ensure your existing one is up to scratch
If recent market uncertainty and unexpected economic situations have taught us anything, it’s that it’s essential to be prepared during challenging times such as these.
For example, inflation and interest rates could rise again throughout the year, you could face a period out of work, or you could become seriously ill and have to take an extended period off.
If one of these situations should arise, an emergency fund could ensure that you can avoid having to borrow money and have the peace of mind that you have cash available to you.
An emergency fund is essentially a pot of money saved away for difficult situations, much like those listed above. You should ideally save for up to three- to nine-months’ worth of essential household expenses to ensure that you’re sufficiently covered. Though, if you’re self-employed or have many dependents relying on your income stream, you may want to consider saving even more.
This rainy day fund should be held in an easy access savings account to ensure that the funds can be accessed as quickly and painlessly as possible.
If you think you’d struggle to afford to save this much, even making small and regular contributions can go a long way to giving you peace of mind.
If you already have an emergency fund, the new year may be the perfect opportunity to ensure that it’s sufficiently topped up and would still cover you in an emergency if your financial situation has changed. This way, you’ll have a safety net that can offer you financial peace of mind for the rest of the year.
3. Refine your savings goals and your budget
Inflation is already high in the UK, and it could rise again during the year ahead. On top of a looming recession, this could make the start of the year the perfect time to review your budget and savings goals.
Figuring out your total income and necessary expenditure for each month could help you determine how much disposable income you have.
After doing this, you can work out your non-essential expenditure and discover ways to cut costs.
You may also find that your savings goals also need to be altered, especially for non-essential savings. For example, savings for things you wouldn’t consider vital, such as a holiday or home renovations, may need to be cut to free up some money for other expenses.
Sacrifices may also need to be made if you have outstanding debts, as these should ideally be prioritised over the coming year. After all, interest rates could rise further in 2023, so you don’t want your debt snowballing and weighing you down.
4. Ensure you have the proper levels of protection
Another way you can prepare yourself financially for 2023 is by ensuring you and your family have the right level of protection should the worst happen.
For example, if you were to be unable to work for an extended period of time, or the worst should happen and you pass away, would your family be able to live comfortably based on your current arrangements?
Severe illness and death likely aren’t things you want to think about at the start of the year when you’re trying to be optimistic about the future. However, it is essential to keep them in mind.
Now could be the perfect time to review your protection to check you have a big enough safety net in place. You should also review the beneficiaries of your protection to ensure that the right people will benefit from any payout.
Also, it may be prudent to investigate new forms of protection. Mortgage protection insurance, for instance, could give you the peace of mind that you’ll be able to keep up with your mortgage repayments if you fall ill or lose your job.
5. Fine tune your pension pot
When times are tough, saving for retirement may not seem as crucial as other financial decisions, but doing so is still essential. This is because the earlier you start saving, the more you’ll have when you eventually retire, as your funds will have more time to grow.
Indeed, data from Nest shows that if you made monthly contributions of £200 to your pension pot for 10 years between the ages of 22 and 32, and it grew by 5% each year until you reached the age of 60, you would have saved almost £125,000.
Meanwhile, if you saved the same amount between the ages of 32 and 42, you would only have £77,000 by the time you reached 60.
As you can see, the earlier you start saving for retirement, the more you’ll likely have built up when you eventually do retire.
If you’re already saving towards retirement, the start of the new year could be the perfect time to review how much you’re investing each month.
This could also be your opportunity to track down any missing pension pots and consolidate them. It’s understandably easy to lose track of things as the pressures of life pass you by, so you should contact any old employers, or contact previous pension providers, and think about merging any older pensions.
Get in touch
Starting the year off right with strong financial promises could give you the peace of mind you deserve. To discuss this more, please email enquire@london-money.co.uk or call (0207) 808 4120.
Please note
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. Think carefully before securing other debts against your home.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.