The start of a new year is a good time to sort out your finances and creating a financial plan can help you to manage any debt, or cash flow issues that you may be having after the festive season. Many benefits come with creating a plan for your cash, like creating a pot of savings for an emergency and paying off your debt. Read on as we look at some of the most common reasons why most don’t stick to their new years plan.
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Benefits of a financial plan
Having a financial plan to stick to is key when it comes to managing your finances throughout the year, but it can be helpful to have a plan in place to help you get your finances back in good shape after the festive season. The New Year is a great time to start working towards your goals for the coming months and starting your finances off on the right foot means you can get ahead with managing your money. If you’re wondering whether you should implement a financial plan to stick to, here are some of the benefits to help you to decide:
- Manage debt: If you’re in debt after the festive season, and you’ve spent too much on your credit card, reigning your spending back in can help to stand you in a better position to manage your bills when they come.
- Emergency savings: Planning to make savings in the year to come means you can put money to one side consistently to ensure that if you are faced with an emergency expense, you can manage it easily without getting into more debt in the future.
- Improve cash flow: Sticking to your budget means you can reduce impulse spending and improve your overall cash flow to make your money go further, and so that you can manage your bills more easily.
Although there are benefits to creating your financial plan, many of us find it difficult to stick to our budget, here are a few reasons why you may struggle:
You don’t have specific goals
When you’re creating a financial plan, it is essential that you set specific goals that you can work towards. Having a goal keeps you motivated and means that you can track your progress easily. Your financial goals can be short or long-term, but it is important that you make them clear – think about whether you’re saving for something imminent like paying off your debt or creating a savings pot for emergencies, or an event in the long-term like purchasing a house or your retirement. Creating specific goals means you can keep up to date with your progress.
You don’t know how to create a plan
Another reason that many of us don’t stick to New Years’ financial plans is that we don’t know how to create one. Think about your income, and how much of your money goes towards bills. Work out how much money you have left over for secondary expenses, and how much you can afford to put into your savings. Make sure you include all of your primary expenses for bills, and mortgage/rent payments to get a good idea of how much you can afford to save each month. As well as this, you should make sure you include debt repayments in your budget so you can get a handle on them going into the New Year.
You have debt
It’s no secret that debt holds you back. After the festive season, you may have racked up debt due to an increase in socialising, and gifting – and it may seem like a good idea to use your credit card at the time, but you must remember that you will receive a bill in a month, so you’ll need to make sure you can afford it when it arrives! Paying off debt can impact your ability to stick to your financial plan because a lot of your income will be going towards making repayments. The money that you are making in debt repayments could be going into your savings, or into other areas of your life, so it’s important that you reduce your debt as much as you can to free up your cash flow.
You don’t want to know
Sometimes it’s as simple as you just don’t want to know. When managing your money, you’re going to need to know your income, your outgoings and everything in between. If you know that you are in debt or have low income, or you’re regularly spending where you shouldn’t, looking at your bank account can be daunting – but this is the only way that you will be able to manage your money better and stick to a budget or plan. Getting to know your money can be difficult to start with but taking the time to use banking and budgeting apps can be a huge help – you’ll be able to get into a routine quickly.
Your goals are too big
Although it is good to have goals – they are a necessity to keep you on track – they can be too big. The goals that you set should align with your income, and you should also make sure that the time frame you have is realistic. If the goals outlined in your plan are too big, you’re never going to meet them or make progress, which can result in you becoming disheartened and going back to your old spending habits.
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