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Make sure you stick to your financial resolutions

Note saying 'New year - fresh start!'

The dawn of 2011 will see millions of people promise themselves that they’ll spend less, save more and ditch their Christmas debt mountains. But what are the chances we’ll stick to these New Year’s resolutions?

Every January 1, normally as the last vestiges of an epic hangover are fading away, I will sit quietly in a corner of my sofa with a pen, a notebook, a cup of tea and – most importantly – big dreams of self-improvement.

I will: drink less wine; eat more healthily; budget more effectively, and start stashing cash in my Isa (which currently has about £10 in it, from the tax year 2006/07. Ahem).

I will not: go to Topshop as soon as I get paid every month, blowing precious cash on pointless items; buy expensive skin creams in a bid to stave off premature signs of ageing; thoughtlessly put my debit card behind the bar of the local pub…

You get the picture.

Trouble is, by the middle of February resolutions like these have usually been consigned to the big bin in the sky. Finally, I reckon I’ve realised why. The problem with my New Year’s resolutions is that they’re never specific enough. So this year, in the immortal words of Take That, everything changes.

My financial resolutions

As I’m a money journalist, I’m going to put my financial hat on for the rest of this Conversation post. So here are a few of my financial New Year’s resolutions – which I’m sure will strike a chord with some readers…

1. I’ll keep a spending diary, then create a realistic budget

One of my problems is that I genuinely don’t know where half my money goes. I’m not mired in debt or unable to pay the bills – but I am occasionally astounded by how much I’ve spent when I check my bank balance.

I need to revisit my monthly budget and make sure it’s as reflective of reality as possible – but before I can do that, I need to keep a spending diary.

So for the first six weeks of 2011, I’m going to keep all my receipts, note down what I’m spending cash on and when, and then look with fresh eyes at how I’m managing my finances. After that, I’ll produce a proper budget that I can regularly measure my spending against.

If you’ve got similar plans, this budget calculator might prove useful, and I’m also a fan of BudgetBrain.com.

2. I’ll close down ‘dormant’ accounts

Once you’ve paid off a credit card or have stopped using a bank account, it’s easy to forget they ever existed. But being busy isn’t a good excuse for leaving dormant any financial product that’s in your name – so I’m going to get my act together in the New Year, call my providers and completely cancel two credit cards and an old current account. I’m going to set myself the deadline of 31 January for completing this task.

In case you’re in a similar situation, here’s why you should close down accounts you no longer use. When it comes to credit cards, having too much available credit – even if you aren’t using it – can damage your credit rating.

Furthermore, if you’re not looking regularly at your statements, any kind of bank or credit card account could be open to fraud. Finally, you could even end up paying extra fees for not using financial products, depending on their terms and conditions. For example, Santander has just introduced such charges on its store cards.

3. I’ll set up a standing order to a Best Rate cash Isa

My cash Isa is as old as some school children, and it’s paying a pretty derisory rate of interest on the £10 I have left in it. The shame!

In 2011, my wedding saving needs to begin in earnest – and the first port of call for any saver who pays tax should be a Best Rate cash Isa, for reasons you’ll find explained in this Which? advice guide.

But simply opening a new cash Isa isn’t enough to ensure I put money aside each month. After all, there are always new shoes to tempt me. So next year, as soon as I’ve finished my new budget, I’ll set up a standing order to automatically put money into the Isa as soon as I get paid. Sometimes, the best ideas are the simplest!

So what are your financial New Year’s resolutions? And what do you think of mine?

Comments
Profile photo of Charlotte Fitzgerald
Member

Your spending diary is impressive! I’ll be intrigued to know if you can keep to it for 6 weeks. I had a similar thought ystd and switched my savings account to one of the top contenders on Which?’s best rate savings accounts. That is, I have good intentions to save in 2011. I don’t think I’ll earn much on the £20 or so I have in there at the moment!

One thing my boyfriend and I have started doing is keeping a shared doc (we use Google doc) for our house budgeting stuff. If a bill changes, or one of us transfers money in/out the account we document it. If a direct debit date changes, we document it. Obviously we don’t keep anything confidential in there – no bank details, names etc.

The bonus? We never have to sit down and talk through the finances! We’re both editors on the doc, and you can set it up so we get alerts when the other updates it. It saves those ‘I thought I told you the gas bill was due’ conversations.

Best of luck with your resolutions.

Profile photo of richard
Member

At £97 a week – My standard state pension – I have no option but to spend the minimum possible or freeze or starve. This is the amount the coalition government has decided is the amount I need to exist – Please try it after all the fixed amounts needed to live have been deducted.

Member
Gerard Phelan says:
2 January 2011

If the minimum State Pension is your entire income, then you should be entitled to Pension credit, and help with Council Tax and Rent – possibly paying them entirely. If you have any disability or provide care for someone else, then further benefits are available – which you are entitled to receive, having paid tax and National Insurance all your life. Try the Benefits checker here http://www.turn2us.org.uk/benefits_search.aspx which is powered by the “entitledto” tool that has been available for many years.

Profile photo of richard
Member

Gerard – You have missed the point entirely.

I worked my entire life paying the correct full tax and NI contributions without stop – I was told that the purpose of this was to pay for my welfare and pension from cradle to grave.

Then suddenly just after I retired Thatcher removed the wages link from my pension – (Roughly at the same time as she destroyed the Inner London Educational Authority). Since that time my state pension has declined by 40% – In fact if Thatcher had left it alone I would be getting as a RIGHT – not a CONCESSION roughly the amount I would have to beg for now.. A typical Tory ploy. .

Why the devil should I go begging for “benefits” or “Credits”??? All I want is my proper pension as was promised me in 1948!!!!!

It is why I fear for the next five years under another “give it to the rich” Tory Greed system.

As I said – try living on a State pension – not State pension plus “benefits and credits” because the pension has been kept artificially low –

Particularly when so many decide only the lazy and shiftless get benefits.

Before Thatcher I voted Tory – never again.

Profile photo of richard
Member

I have serious problems with this.

I have never been behind with any payment ever – for over 65 years – I owe nothing – paid my mortgage in 1995 – I have never been overdrawn since 1952 (as a student awaiting a late grant with Banks approval) – I have several savings accounts for various specific purposes – one that I have not contributed to since 2007 since the credit crunch – because I have no surplus money to put in it (It is called a savings account – not a planned contribution scheme.)

So how could I have anything but a good credit rating???????

Member
Gerard Phelan says:
2 January 2011

It doesn’t read as if you have any recent record of paying off loans, so that could make you a poor credit risk in the eyes of lenders. Crazy? From your perspective I agree, but ask yourself what evidence in your recent financial life a lender could use to see that you will make loan repayments. This is nothing new – see the Which? article on loans. http://www.which.co.uk/money/credit-cards-and-loans/guides/your-credit-report-explained/why-do-i-have-a-bad-credit-rating-/

Member
Sam D says:
3 January 2011

Richard, I’m not sure its completely clear from this article however the sheer number of “credit” accounts you have (whether run impeccably or not) can have an effect on whether new creditors will do business with you.

So I think the point is, if you don’t *need* it, close it.

Profile photo of richard
Member

Gerard – Wonderful isn’t it?

I was taught to “live within my means” – So I saved to buy things FIRST. The only items I bought on credit were a house – and a car. The house was paid for before the end of term – and the car on time – They are the ONLY loans I’ve had EVER – I’ve lived within my means. You are saying in effect that the only way to have a “good credit rating” is to be in constant debt!!!!! Totally cazy and I can’t and don’t believe it.
In fact my actual experience says it isn’t true as I’ve applied for several largish loans in the past and had the loans agreed – but I always thought better of them and did the job without loans,

Sam – I have five savings accounts with one bank – to far easily control the movement of my money.
This is no different to when I was running my own three businesses. I need the accounts open for my convenience – I am the customer and the customer is always right.

Frankly if these so called “creditors” cannot understand what a properly controlled budget is – then no wonder we had a Credit Crunch – and are still likely to have another.

Profile photo of cheshire resident
Member

The only type of credit (other than mortgage & car purchases) I ever take out is INTEREST FREE. If we needed a new bed/cooker/washing machine/ freezer etc and didn’t have the ready cash, we always looked for interest free deals. Even when buying a car, we invariably found lower interest rates by shopping around for finance.
I used to like the old Tessas, which encouraged regular monthly saving. Still do it with the ISA. Then at the end of the year, look for a fixed rate 12 month ISA Bond to transfer it to.