Making resolutions in the New Year is not for everyone. Some people are motivated enough to change their bad habits on the spot, others need a little more encouragement and enjoy the fresh start that new beginnings like New Year can offer; some people don’t like change at all and might find resolutions a waste of time. While resolutions might not be your thing, the concept of changing bad habits for the better is not a bad one to think about from time to time, especially when it comes to money. January is a notoriously bad month for people’s finances. With Christmas’ overspending coming round to repayment and December’s early payday making the gap to January’s wages painful, it’s no wonder we don’t want to think about money at the start of a new year.
But despite the negative connotations, the New Year can actually be one of the best times to start practicing good money management by addressing your bad money habits.
The first step in negotiating your financial habits is trying to recognise which ones need some work and which ones are already working for you. It’s not the easiest task, especially if some of your financial habits have evolved out of your day to day tasks because these will be hardest habits to change. It might be easier, to start with, if you focus on the good habits and how to make them better, rather than trying to immediately crush your bad habits, especially because a sudden big change can cause you to feel resistant whereas small changes can feel easier to accommodate.
Using a credit card throughout the month instead of spending your bank balance can be a comfort to some people as their current account reflects a healthy balance for a longer period. But spending like this can lead to an over-dependence on credit and could cause financial difficulty if something went wrong and you couldn’t repay your credit card balance in full. While it’s not a bad thing to have access to credit, using it unnecessarily can amplify bad financial habits. It might also make it harder to get accepted for instant cash loans in an emergency if you already have a significant debt on a credit card or overdraft.
Having little awareness of your day to day finances is one of the easiest ways to overlook your money and feel out of control. If you always pay your bills on time, it can be tricky to understand why you need to track your spending but keeping an eye on your invisible spending and the ways you might be wasting your money can help you divert those funds towards your savings instead. It doesn’t mean you have to neglect your comfort spending, but it can start to influence your decisions and help you make wiser choices.
Your invisible spending is the purchases you make each day that you can’t necessarily recall. If you often view your bank statement at the end the month and can’t work out why your balance is so low, you’re probably a victim of invisible spending. While this isn’t a financial wrecker, it’s an area that most people could improve on quite easily and the difference is often massive. Try to think a little more each time you tap your card or withdraw cash from an ATM. If you need £20 in cash, it can be tempting to withdraw £30 as a “just in case”, but that extra £10 is likely to get lost in your day to day, rather than being spent purposefully. When you’re out for the day, consider how those small purchases typically under £10 add up.
This is a habit that will probably take a while to fully implement because there are always going to be days where your finances are the last thing you want to think about — especially if something has gone wrong and you’re struggling a little. But part of building your financial wellbeing is feeling in control of your money and this comes from not feeling overwhelmed or scared by it. Try to smile before starting any sort of financial management, to release those happy hormones. This can help you retrain your automatic emotional response when it comes to money. Then, when allocating time to financial tasks, give yourself a whole afternoon rather than a 10 minute slot so you’re not rushing, and make sure you have no other urgent tasks because this will make you feel like the money management is unimportant and reinforces the negative connotations.
Having savings means you don’t need to depend on credit when something goes wrong. You can instead choose to borrow if it’s more convenient than using your savings – for example, if you have a 0% credit card and you need to maintain a specific balance in your savings account. This gives you more flexibility and control over your money.
Increasing your financial resilience takes time but it means you can more easily recover from financial shocks like loss of income or even an expensive car repair. Rather than worrying about where you can find the money, you’ll feel more comfortable in your ability to manage your finances.
By building up a cash fund either for emergency purposes or just rainy days, you no longer have to worry about how to get a small loan with bad credit because you’ll have savings to rely on instead. This means you won’t need to take out credit every time you enter a spot of financial difficulty and can focus on repaying any existing debt. As your debt reduces, your credit score should start to improve, widening your borrowing options in the future and granting access for things like low interest credit cards and even a mortgage which may have been unattainable with a previously poor credit history.
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