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.
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?