As we approach 2023, the UK’s spending watchdog has made some unwelcome predictions for the coming year, the Guardian has reported. According to the article, the Office for Budget Responsibility (OBR) has said that Britain will be ending 2022 in a recession, and that households could face the biggest fall in living standards since records began.
While you probably have seen the rising cost of living affect your household finances, this might not mean your standard of living has dropped or will do so. That said, you might still want to take steps to be shrewder with your money in 2023 and beyond.
If so, discover six clever financial habits you could start in the new year.
1. Check your finances regularly
As 2023 begins, get into the habit of carefully checking your finances at least once a month. It will make it easier for you to keep on top of your income and outgoings, and stop it becoming an all-day job you’ll dread doing every six months.
It also means you’ll spot any anomalies quicker so that you can take action. For example, if you’ve been scammed and hadn’t realised.
2. Work to a budget
Getting into the habit of working to a budget will help you manage your money far more successfully. Doing this could help you avoid an unexpected financial mishap that may result in an unforeseen debt or charge.
Working to a budget also provides peace of mind that you are meeting all your financial commitments. This means you will not have to rely on credit cards or loans to meet your overheads, which typically charge high levels of interest.
3. Reduce your debt
In November 2022, the Bank of England increased its Interest rate to 3% in a bid to reduce soaring inflation. Rising interest rates means that debt usually becomes more expensive, which could have a significant effect on your household finances.
As such, paying down outstanding debts, or clearing them completely if you can, could be a wise financial resolution for 2023.
If you have credit cards, pay more than the minimum every month if possible, as it could mean you pay significantly less interest. It could also reduce the amount of time it takes to clear your debt and help improve your credit score.
4. Use the “30-days rule”
According to the Guardian, Britons are buying small luxuries such as expensive eyeliners, luxury lip balms and premium coffee to cheer themselves up as the cost of living skyrockets. If you’re shopping to treat yourself but suffer from buyer’s remorse later on, you may want to consider the 30-days rule to help reduce your spending.
When you see something you would like to buy, instead of going ahead, commit to buy it in 30 days if you still want it. During the period, consider carefully why you want it, and if at the end of the period you still do, go ahead and buy it.
5. Maintain a “rainy day fund”
Having money put aside for a “rainy day”, which is known as an emergency fund, is central to good financial practice. The Covid pandemic reminded us that you never really know what tomorrow holds, and having enough money to stay financially afloat when life doesn’t go to plan is essential.
While it will vary according to your individual situation, typically it’s best to have between 3 to 6 months’ worth of expenditure in your fund. It should also be held in an easily accessible account. Additionally, the money could cover unexpected costs, such as the car breaking down or the boiler blowing up, without having to use credit cards or loans, which may be expensive.
6. Consider investing your money
If you would like to expose your money to greater growth potential in 2023 and beyond, you might want to consider investing it. Historically, investing has tended to expose money to greater long-term growth potential than keeping it in cash savings.
According to a study by Schroders, between the start of 1952 and the end of May 2022, UK equities returned 11.7% a year on average while cash averaged 6% a year. As the Office for National Statistics revealed inflation stood at 10.7% in November 2022, investing your money might be a savvy way to help inflation-proof your wealth.
That said, while investing may expose your money to greater growth potential it should not be entered into lightly and should always be seen as a long-term venture. Please remember, past performance is no guarantee of future performance.
Get in touch
Another good habit for 2023 and beyond is to work with a financial planner, as they will help you create a wealth strategy that helps you meet your financial goals. That said, if you only use a financial planner on an ad-hoc basis it could reduce the benefits of working with one.
Creating an on-going working relationship with an adviser means they can monitor your wealth to ensure it stays on track to meet your objectives, and provide options if they’re not. According to Royal London, those who have an ongoing relationship with a planner were up to 50% better off than those who had only received advice once.
If you would like to discuss how you could ensure your financial security or expose your money to greater growth potential, please contact us on info@janesmithfinancial.com or call 01234 713131.
Please note
This blog is for general information only and does not constitute advice. It should not be seen as a substitute for financial advice as everyone’s situation will be different.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation that is subject to change.
The information is aimed at retail clients only.
Always remember that the value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
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