As the first week of the New Year comes to an end, many people will be focused on figuring out goals around saving and being smart with their money.
However, there are some common traps people fall into when trying to get their finances in order – that can be avoided.
Mistake No. 1: Not setting a specific, achievable goal
When it comes to making financial resolutions, people want a “Goldilocks goal” — something that isn’t so big as to be unachievable but isn’t so small that its effects are negligible.
Britons are warned “don’t be vague,” but instead aim for “save £X every month” or “get an X percent raise.”
Mistake No. 2: Keeping your financial resolution to yourself
Berna Adat, author of Money Out Loud said: “Everyone has problems with money, and yet it’s something that we’ve refused to talk about, which is nuts.
Bringing at least one friend or family member into the “what” and “why” of your money goals provides some much-needed accountability. As a bonus, it’ll give you a built-in cheerleader for when things get hard.
Having a money partner could mean scheduling regular check-ins where you talk about how you’re progressing and any upcoming potential obstacles.
Mistake No. 3: Not automating your savings
If someone is like the roughly 40 percent of people who made a New Year’s resolution to save more money, here’s one of the easiest errors to avoid: Don’t simply plan to save whatever is left over at the end of the month.
Instead, in January, set up automatic deposits to their savings that happen every time you get paid.
People can set up recurring transfers from their checking account into a savings account, or, if their workplace allows it, have a percentage of each paycheck deposited directly into their savings.
Amy Knight at NerdWallet UK, explained it’s time to take control of one’s financial goals.
She said: “For many UK consumers, 2023 put our finances through a lot. High inflation saw the price of everyday items soar. Meanwhile, increased interest rates led to household budgets being squeezed by higher monthly mortgage payments.
“With disappointment that changes to tax thresholds were notably absent from the Autumn Statement, it would be easy to start the New Year grumbling about the economy or your financial situation, but that won’t set you up for financial success. Instead, focus your energy on getting 2024 off to a shining start:
“Deal with Christmas debt early – It’s common for consumers to spend more in December than at other times of the year, despite many of us having less disposable income.
“If you’ve put presents, meals, drinks and decorations on a credit card, or used buy now pay later to cover the cost of larger gifts, take time over the festive break to write down everything you owe and check the interest that will accrue monthly on what you’ve borrowed.
“Before you start spending on ‘new year, new me’ goals, such as gym gear and fitness equipment, prioritise paying off your debts. Start with the debt that is accruing the highest interest rate first, as this will cost you more if you don’t pay it off.”
