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How to Start 2021 in a Better Financial Position

2020 has been an unpredictable and difficult year for many reasons and it has left a lot of us in a different financial position to the one we started the year in.

If your finances have taken a bit of a hit or you just haven’t been able to focus on your financial goals this year, then this guide should help you with how to get your finances back on track and in a stronger position going into next year.  

We don’t know what 2021 has in store for us yet, but having your finances in order will make things a little bit easier as it will be one less thing to worry about.

Review your current situation

Before you can start to plan and set your goals for next year, the first thing that you need to do is to review your current financial situation. This will mean gathering up your bank statements, receipts, bills and any statements of investments or debts, so you can see exactly where you stand with everything.

Looking through your bank statements, receipts and bills will allow you to see exactly what you’ve got coming in, what you’re saving, and how you’re spending your money. Doing this will highlight where any adjustments are required – this could be areas where you need to cut back spending, or you may realise that you haven’t been saving enough or putting enough towards debt repayment.

Make sure to also have a look through all of your direct debits and standing orders. It can be easy to set these up but then forget to cancel them if and when you stop using the product or service, so make sure that you’re not paying for anything that you don’t need or use.

Decide on your goals for next year

Once you’ve analysed your current finances, you can now start to work out your financial goals for next year.

You may want to completely clear your debts, start saving for a house deposit, wedding or dream holiday, or you may want to put some money into starting your own business.

Whatever your goals are, it’s important to keep them in mind so you can start to adjust your finances accordingly.

Create a budget

Now that you’ve reviewed your current financial position and decided on your goals for the next year, you can start to create a budget that fits with both of these.

Having a budget is really important if you’re serious about keeping your finances under control. The term ‘budget’ is usually associated with strict rules and restrictions, but a budget is actually a very useful tool and can be used to;

  • Monitor your income and outgoings
  • Keep track of your spending and bills
  • Help reach your savings goals
  • Help with debt repayment

Creating a budget is the first step to regaining control over your finance if this is something you’ve struggled with over the past year.

If you already have a budget in place, then now’s the perfect time to review it instead. No budget should be set in stone – income, bills, debt and financial goals change, so you need to keep your budget flexible and up to date.  

Automate outgoings

Automating all of your outgoings is one of the best ways of staying on track after you’ve created your budget. Having all of your bills and debt repayments leave your account on an automatic basis will mean that you’ll never miss a payment and you won’t have to remember multiple monthly transactions.

If you have a goal of saving every month then you should automate this too by having a set amount move from your current account to a savings account via a standing order. Doing this will make saving money much easier as you won’t have to think about it and, if you set this up for the same day that you get paid every month, after a while you will get used to your new monthly income and not notice that the money’s gone.

Consolidate/balance transfer debts

If you have multiple loans or credit cards that you’re paying off, it might make sense to consolidate these into one debt. Potential options for this could be a personal loan or a 0% balance transfer card.

Consolidating your debts means moving them all to one place by paying them all off with a new loan or credit card. This will make your debt far easier to manage as you’ll only be charged one rate of interest on the whole amount, making it easier to see how much you owe in total, and you’ll only have one monthly repayment to think about too.

Review your credit report

If this isn’t something that you do on a regular basis, then now would be a really good time to review your credit report and score. You should check for any discrepancies in the personal details or account information being displayed as anything incorrect or not updated could be damaging your score.

When you’re checking your credit report, make sure that the following things are correct:

Credit Report Check List

  • Your full name, date of birth and current address.
  • Electoral roll information.
  • The current accounts that you have open, and the overdraft limits and current balances for them.
  • The credit card accounts that you have open, and the credit limits and current balances for them.
  • Any current loans and their outstanding balances.
  • Any defaults, repossessions, or missed payments.
  • Credit applications and searches – make sure there’s nothing showing on your account that you didn’t apply for.

If there’s anything that’s incorrect and harming your score, acting on it now will give you plenty of time to get any amendments made before the new year.

Doing all the points mentioned in this article will make you feel like you have your finances back under control and ready to face the new year.


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