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The ushering in of a new year brings a new set of expectations and goals to stick to. In this article, we cut through the noise with 5 personal finance tips to help you set up for a financially successful year!

‘Ignore’ your pay rise with an Investment

If you got promoted or a pay rise last year, you could fall prey to ‘lifestyle creep’. Lifestyle creep is the expense of your lifestyle creeping up with an increase in your take home pay. Getting used to the increased amount you earn each month is all too easy. Opening an Investment and transferring the excess you’ve recently started earning is a great way to make sure you don’t spend it, and to see returns on your contributions. Make money off your saving habit.

However, with the cost-of-living crisis in full swing, an increase in pay might be in proportion to the increase of…everything else. Everyone’s situation will be different, and rewarding yourself for a well-earned promotion is important too. Take a couple of months to figure out how far your money goes and if you have any excess, consider opening an ISA to contribute to – it’s one of the most tax-efficient ways to invest.  ‍

Make credit cards work for you

Putting as much spending as possible on a reward card is a smart way to take advantage of the rewards they offer. The hard part is finding the credit card that reimburses you in the kind of rewards you want, whether it’s nectar points, Amex Avios or cash back. If you’re organised with your money and can put the money aside to pay off your credit card balance in full each month, it can be ‘free money’.

Delete shopping apps and apply the 48-hour rule

A lot of money gets invested into shopping apps to make you buy more, more than you usually would. Notifications, emails, early sale access, these apps are designed and engineered to push you into buying.  Not only is deleting them a good idea for your financial wellbeing, but also for your mental health. Another tip to make meaningful purchases online and ultimately buy less is by considering any online purchase for 48 hours before buying. Features like next day delivery deliberately hasten people into making impulsive purchases. Having a cool off period lets you take back control and make conscious decisions about your spending. You could even transfer the amount you were going to spend into a savings account during that time, to see which makes you feel better. Either way, being in control of your spending is a lot easier without invasive shopping apps.

‍Consider your employment options

Getting a better job with a higher salary is something that could make a huge impact on your overall financial life. It is worth evaluating your options and enquiring at your current role if there is opportunities for promotion or pay rise. If you do get a significant pay rise from an employment change, try to put the difference into an investment account. As they say, the best way to save is to increase your income.

‍Don’t put too much financial pressure on yourself

This might sound like a counterproductive tip, but there’s a lot of pressure on people to have their financial situation completely together. Right now, is a very difficult time for a lot of people with inflation and the cost-of-living crisis eating away at expendable income and pushing people into debt. It’s difficult to adjust to the newly increased cost of the essentials, so don’t be too hard on yourself if you’re not saving as much as you’d like to each month. It’s important to strive for financial stability, but not at the expense of your quality of life and happiness. There are plenty of resources online to help you cope with financial worries; be sure to check them out. There’s a balance to be made between enjoying your life and preparing for the future. Breathe. And if you’re looking for a professional perspective for more ways to make the most of your money, feel free to reach out to our team.

So you’re pumped and ready to get your finances in order. That might mean you’re hoping to hit some major goals—like paying off debt, saving for a big purchase, or getting your retirement investments in a good spot. It could also mean you’re just tired of how much inflation’s got things feeling tighter than a pair of baby shoes on Sasquatch.

Either way, if you aren’t where you want to be with your finances right now—something’s got to change. And this list of 12 things to do differently with your money in 2023 can help.

1. Get on a budget.

It all begins with a budget—a plan for your money. Budgeting can get a bad rap because people think it takes away your freedom. But budgeting is seriously so empowering. And that’s because when you budget, you are telling your money where to go so you can stop wondering where it went.

If you haven’t been doing this in the past, make a budget. Pronto. It’s the first step to taking control and being intentional with your money.

2. Budget for inflation.

When people budget, they say they feel like they got a raise. And with inflation, that “raise” is something we could all use, right?

Also, budgeting is how you create margin with your money. Because when you plan out where your money’s going, you’ll easily see the spots to cut or trim back. And if you decide you need to get a side hustle to help balance the rising costs, budgeting is how you’ll make sure that extra income gets used for what you need—instead of accidentally getting spent on checkout-line candy bars or one-click impulse buys.  

Yes, inflation is tough. But you (and your budget) are tougher! So, adjust that budget for inflation, and you can stand up to those rising costs.

3. Don’t wait on student loan forgiveness.

You’ve probably noticed: The student loan payment pause has been more on-again, off-again than Ross and Rachel in Friends. Stop waiting to get those loans forgiven! We’ve been talking about this forgiveness for four years. And so far, it’s just been talk.

Student loans are a heavy weight to carry. They’ll slow you down from truly moving on with your life. Plus, you signed a paper saying this was a debt you’d pay off. Be done with it. 

4. Pay off your debt!

While you’re at it—pay off all your debt! Debt keeps you stuck in the past and robs you of so many opportunities, right now and in the future.

Don’t know where to start? Use the debt snowball method to knock those payments out of your life. One. By. One. You’ll start with the smallest and work your way to the largest: building momentum and motivation with each stamp of “paid in full.”

Listen: The freedom that comes from being debt-free is like nothing else. Is it weird? Yeah. Is it worth it? Heck yeah.

5. Beware of buy now, pay later.

These buy now, pay later (BNPL) scams are everywhere. Klarna, Afterpay, Affirm—the list of companies pushing these digital installment payment plans keeps growing. And they all have one goal in common: jumping on the trend to entice people to buy stuff they can’t afford with “easy payments.” It may sound like just the thing to help you deal with inflation. But it’s really just a trap that keeps you stuck in debt. Nope. Gross. Nope.

Listen to these stats from a Ramsey Solutions study:

• A majority (60%) of buy now, pay later users had trouble managing their payments.
• Two-thirds admitted they were still paying for an item they bought with a BNPL service even after they no longer owned the item.

Again we say: Nope. Gross. Nope. When it comes to BNPL scams, stay far, far away.

6. Pay attention to your online spending habits.

Here’s another important thing to do differently with your money: Pay attention to your online spending habits.

Most (two-thirds) of impulse shopping happens in our beds, online, on our smartphones.¹ The ability to buy quickly and have it at your door pronto is like having a genie in a bottle . . . who drains your bank account with every click of that “buy now” button.

How can you keep yourself in check here? Try one (or all) of these:

• Delete shopping apps from your phone.
• Think about a purchase overnight before buying.
• Clear your cookies on your browser so you get fewer targeted ads.
• Check in with your budgeting accountability partner.

We aren’t against online shopping. It can save you time and money when you do it well! But it’s so easy to not do it well. So, pull out the budget, review your online spending habits, and make it as difficult as possible for you to overspend online.

P.S. We all know that reviewing and changing your budget is way easier with a budgeting app. And we happen to have one called EveryDollar. And it’s free.

7. Make sure your emergency fund is fully funded.

This one depends on what Baby Step you’re on. What’s that? The 7 Baby Steps are the proven, guided path to save money, pay off debt, and build wealth. And getting your emergency fund set up is part of that path!

 If you’ve got debt, you need just $1,000 in savings as a starter emergency fund (Baby Step 1). Then attack that debt with the debt snowball method we mentioned earlier. (That’s Baby Step 2.) Then build up a fully funded emergency fund (aka Baby Step 3). 

How much money should you save up? Three to six months of expenses. Why is an emergency fund important? This safety net in life gives you a ton of peace and comfort knowing you’ve got cash in the bank to pay for the emergencies that are bound to happen.

So, if you’re ready to finish up Baby Step 3, get at it! And if you had to dip into your emergency fund last year, rebuild it!

8. Don’t stop investing.

Speaking of Baby Steps, saving for retirement is what comes after you’ve built up that fully funded emergency fund. If you’re there right now, don’t stop investing just because the market is down. Retirement investing is a long game. It’s a lot like a roller coaster—and you know what happens when people jump off a roller coaster in the middle of the ride? They. Get. Hurt.

Ride the ups and the downs. Keep investing.

9. Don’t sit on the sidelines if you’re ready to buy a home.

If you’re ready to buy a home, buy a home—don’t wait on rates or prices to drop. But how do you know if you’re ready?

• You’re debt-free with a fully funded emergency fund.
• You’ve got a proper down payment. Ideally, you should put down 20% or more to avoid PMI. But if you’re a first-time home buyer, 5–10% is okay too. 
• You qualify for a 15-year fixed-rate conventional loan (no VA or FHA loans). 
• You can stick to spending 25% or less of your monthly income on house payments (including mortgage, HOA, taxes, insurance and PMI).
• You can pay the closing costs and moving expenses without stealing from your down payment.
• You plan to stay there more than a year or two. 

10. If you’re married, get a joint checking account.

When you get married, the two become one. And that includes your finances! This means living with an ours attitude, not dividing income and bills and payments. All that division with your money can create division in your marriage. But when you work as a team—you’ll win faster financially.

Communicate. Combine dreams. Go toward the same main goals. Together!

If you’ve been dragging your feet to combine your checking accounts—this is the time to do it.

11. Have a bigger why for your money.

What’s your why for doing things differently with your money this year? If you haven’t thought of that yet, think it through now. Write it down. Do you want to budget so that you can take control and have confidence with your money? Do you want to be debt-free so that the weight of your monthly payments doesn’t keep you up at night anymore?

One ultimate, big-picture why of managing your money well is to build wealth so that you can be outrageously generous. And it’s so important, we have a whole lesson on it in Financial Peace University (our course on how to walk those Baby Steps: aka save for emergencies, pay off debt fast, spend wisely, and build lasting wealth).

Right now, that moment might seem so far away it isn’t even imaginable. But take a second to imagine it! The bills might be stacked high right now. Inflation might have you feeling like a tightrope walker with 50-ton weights on your ankles.

But you will survive. And you will thrive. Write down a why for now—and dream big about your why for the future as well.

12. Have hope for your money.

Speaking of thriving, take heart. Have hope. The past few years have been hard. If you’re discouraged right now, you aren’t alone. But you also aren’t stuck.

It is so easy to get discouraged when you feel like your money isn’t getting you as far as it used to, or like you aren’t reaching your goals as quickly as you planned.

Have hope.

One characteristic we see all the time in the people who win with their money? They believe they can. So hear this: You can! Work through these 12 things to do differently with your money, and you can make a true difference with your finances—and your future.

‍Very simply put, a recession is when there is significant decline in a country’s economic activity. The most popular rule of thumb to define when a country officially falls into recession is when the country’s gross domestic product (GDP) declines over two consecutive three-month periods – known as quarters.

Gross domestic product (GDP) measures the monetary value of final goods and services – that is those that are bought by the final user – produced in a country in a given period of time. (imf.org, 2020)

A healthy economy grows over time, so when we see consistent decline over two-quarters in a row, it is clear there are underlying issues in a nation’s economy. During a recession, companies will struggle, people will lose their jobs and the overall economy will struggle with output. And while recessions bring incredible hardship to individuals and businesses, they are considered a natural and inevitable stage of the economic life cycle.

What causes a recession?

Recessions can be caused a number of ways – including sudden economic shock (an example of this is the Coronavirus pandemic), asset bubbles, excessive debt, deflation and inflation, and vast technological change.

Deflation vs inflation. Inflation occurs when the prices of goods and services rise, while deflation occurs when those prices decrease. Central banks keep a keen eye on the levels of price changes and act to stem deflation or inflation by conducting monetary policy, such as increasing or decreasing interest rates. (Investopedia, 2021). The Bank of England’s target inflation rate is 2%.

Asset bubble. An asset bubble occurs when the price of an asset, such as stocks, bonds, real estate, or commodities, rises at a rapid pace without underlying fundamentals to justify the price spike. (Investopedia, 2022). A well-known example of this was the dotcom bubble in the late 1990’s where investors excitedly put billions of dollars into Internet-based start-ups in the hopes the companies would turn a big profit. But when the bubble ‘burst’ the market crashed by nearly 77%.

The leading cause of the Bank of England’s prediction that a recession is on the way is inflation. In August 2022, inflation surged to the highest rate in 40 years to 10.1% and shows no signs of slowing down, with forecasters anticipating a peak of 13% in coming months.

In an attempt to reduce inflationary pressure, central banks around the world have increased interest rates – in the UK the Bank of England raised interest rates in August from 1.25% to 1.75% – the sixth rise since December 2021.

The idea being that with increased interest rates, people are encouraged to save more and reduce their consumption of goods and services, as it becomes more expensive to spend and borrow money to afford these purchases. But it’s a double-edged sword, because increasing interest rates to reduce inflation may well push economies that are already struggling into recession.

How long will the recession last?

This will be the third recession the UK has experienced in the last 14 years, and the Bank of England predicts it will last around five quarters – that’s 15 months. The last time we had a recession of this significance was the 2008 Global Financial Crisis (GFC) – also dubbed as ‘The Great Recession’.

How to invest during a recession

One of the knock-on effects of people spending less and slowed economic growth is that businesses begin to struggle, and the value of stocks and shares decrease, affecting even the strongest portfolios. Investors should prepare themselves for more market turbulence ahead. However, having said that, even during a downturn, the stock market provides opportunity to grow your money if you take a long-term view. we recommend a 5-year minimum strategy, based on data and historical trends.

‍Here are five key things to consider:

Don’t panic, and avoid knee-jerk reactions that don’t align with your long-term goals. 

Avoid checking your investments too regularly as this can cause unnecessary worry during volatile periods. A sensible approach would be to check every 3 – 6 months. 

Ensure your portfolio is diversified so that investment risk is spread out. 

Check your fees are low so they won’t be ‘eating away’ at your investments – it might be worth transferring your investments, but you should get financial advice first to make sure it’s the right decision.

Take comfort from the past. Historically, there has always been market disruptions and recoveries – you just need to be patient.

What else can be done?

With all the above said, personal finances are also undoubtedly going to take a significant hit and households will suffer. Government intervention is certainly needed, but what’s important is that you focus on what you can control. Now is the time to sit down and really scrutinise your incomings and outgoings so you can take comfort in knowing that you are doing everything you can to maximise your money.

If you don’t already have one, start building an emergency fund and contribute to it regularly – every pound matters. Ideally, an emergency fund holds 3-6 months’ worth of your expenses.

Build a monthly budget and stick to it. It sounds so simple, but in practice it can be difficult. We have many resources to help you get started.‍

Prioritise keeping your credit score high by paying bills and debts on time.

Look for opportunities to save by switching providers, cancelling unused subscriptions, and using reward and loyalty programmes such as cashback sites.

Finally, if you are thinking of starting to invest now or considering new investments to make your money work harder for you long-term, we’d be happy to speak with you. Either email, call or message us on Live Chat and we can put you in touch with one of our financial advisers directly.

‍Whenever you invest, your capital is at risk and there’s a chance you may get back less than you put in.