Even after leaving behind those infamous January blues, a sense of melancholy can remain amidst the cold weather and the pressure to maintain financial resolutions.
However, by embracing practical budgeting strategies, people will have no reason not to be more cheerful.
It goes without saying that 2023 was another difficult year, and the cost-of-living crisis continues to place financial stress on many households. Just when things looked to be tracking in the right direction, the announcement that inflation had increased to 4% in December from 3.9% in November caught many off guard.
Consequently, not only has Britons’ spending power been reduced, but borrowers have seen their repayment costs soar due to high interest rates – the base rate currently sits at 5.25%.
Any opportunity for people to invest in savings has been curtailed by the hike in prices of everyday necessities such as food, energy, and housing. Therefore, many people’s long- or even medium-term goals have had to be shelved. Putting money aside for a holiday, a new home or even retirement has become unmanageable for many.
For example, a 2023 YouGov study revealed that 36% of people in Scotland couldn’t afford a holiday, while in the UK, the number of first-time buyers fell to the lowest level in a decade – down by a fifth from 2022.
Although challenges persist, the start of the year brings an opportunity for families to assess their finances, formulate plans, and set a positive course for the rest of 2024.
The worth of creating a far-reaching financial strategy
Knowing where to begin can be the hardest part, especially with the cost-of-living crisis lingering in the background. However, simplifying the methods into simple steps can make the process considerably less overwhelming.
To get to where you want to go, it is vital to understand where finances currently sit. Assessing savings, investments, repayments, incomings, and outgoings will give you a more detailed idea of the best course of action.
Understanding your financial outlook will allow you to set realistic and achievable goals. It could be a dream holiday, a wedding, or a new car. Whatever the objective, laying down specific and measurable targets leads down a path to financial success.
From here, savers can assess their spending habits and seek ways to trim expenses. It’s important to remember that even the most minor contribution to a savings pot can lead to significant gains in the future.
Optimising savings
To make the most of the current high interest rates, which are predicted to drop later in the year, it is crucial to seek out the savings products and providers that pay the highest returns.
With a large number of savings accounts now giving returns that outstrip inflation (600+), you should be thorough in your search, selecting the accounts that not only provide high returns but that are also a perfect fit for your financial objectives.
A 2023 Chetwood survey of 2,000 UK adults revealed that many Brits do not take advantage of the wide range of savings products at their fingertips. Only half (56%) of those asked have a monthly savings account, while a considerable number (82%) do not have Lifetime ISAs for retirement planning.
Savers need to be proactive and search beyond the well-known high street lenders, where they may find products that not only provide great rates but that also suit their financial goals.
Challenger banks and tech-based providers can be worthy alternatives. Due to their smaller size, these providers can be highly innovative and flexible, allowing them to track market changes quickly and alter their products accordingly to suit their customers’ needs. As it stands, some providers have fixed-term products that are near the base rate.
Review and re-evaluate
Once you’ve formed the foundation of your financial plan, it’s vital that you constantly review your savings. Active engagement will ensure your financial goals remain on track and achievable and will best position you to be flexible if there are any personal or economic changes.
Engaging with tools that aid in keeping budgets and goals aligned, from budgeting apps to money dashboards, is a simple way of keeping tabs on savings and making adding to them more efficient.
For example, ‘round-ups’ take spare change from any money spent on a debit card and transfer it directly into a savings account. The use of digital savings tools like this not only enhances financial awareness but also equips individuals to make savvy savings choices.
Those who believe they didn’t kick off the year with a fresh beginning needn’t fret. Arranging one’s financial matters and embarking on the journey toward a confident and secure financial position can be done at any time of the year.
By crafting a robust financial plan and steadfastly sticking to it, the prospect of 2024 becoming a year of flourishing financially is well within reach for savers determined to boost their financial well-being.
Sam Compton is director of operations at Chetwood Financial
