How to make your money stretch further in 2023
They call it the most wonderful time of the year…but The Bank of England has confirmed many people overspend at Christmas. The bank also found that the typical UK household spends £2,500 a month. In December, that rises by £700, or 29 per cent.
Beat the battle to pay this back in 2023 with these top tips on making your money last longer and how to pay off credit card debt or short-term loans as a New Year's Resolution.
Making your money stretch further
Why committing to saving is a great New Year's resolution
Three simple tips for setting a personal budget
Sticking to your financial resolutions
Look after the pennies and the pounds will look after themselves
Making your money stretch further
The simplest and most effective answer to the question 'how to save money?' is to spend less. But that isn't easy during the season of goodwill. One statistic to bear in mind - especially during a cost-of-living crisis - is that it can take up to seven months to pay off debt accumulated in December. More than a third of people (32 per cent) who took part in the Nationwide Building Society survey in 2018 said it took them until July of the following year to clear Christmas debt. Of the 2,000 people surveyed, 36 per cent said Christmas left them in the red, to the tune of £426 on average.
To make your money last longer, spend some time thinking about purchases well in advance. Make a list of what you really need and then put a price you can afford next to each item to avoid overspending. This method is beneficial for Christmas shopping as you can tick off items on your list as you go, resisting the temptation to buy more.
Try and avoid spending on a credit card if you can; however, if necessary, be sure to use your credit card responsibly.
Shopping around for the best bank account deals rather than sticking to what is convenient also helps spread costs. Sales, such as those held around Black Friday or Cyber Monday, can be a good way of bagging a discount, but it is essential not to get carried away. Our experts have compiled a guide to staying savvy around sales to help.
When it comes to gifts, also consider buying second-hand from social media marketplaces, charity shops or pre-loved websites. These products can often be in 'as new condition and sold at very low prices. Hand-making presents or giving someone the gift of time to spend together in the new year instead can often be more appreciated than just another pair of fancy socks.
Why committing to saving is a great New Year's resolution
Did you know that a quarter of UK adults have less than £100 savings set aside? The research from The Money and Pensions Service also found that one in six people held nothing as a financial buffer. This lack of a safety net leaves families vulnerable to unexpected or emergency costs such as urgent house repairs or a broken appliance. In many cases, people must borrow money to pay for those charges instead and may then struggle to pay back the loan.
So, saving money is critical, and when a New Year is on the horizon, it is the ideal time to commit to more frugality. Simple changes such as cutting back on takeaway coffees can significantly impact your bank balance in the long run and are often quoted in how to save money guides.
Look at how you can save money by reviewing your spending transactions over a month, either through online banking or by getting a bank statement and highlighting the areas you are overspending and could cut back on. You may discover that you spend a lot of money on work lunches, for example, and be able to take your own packed lunch instead.
Or perhaps there are service subscriptions you no longer use but are still paying for, which you can cancel. Reducing your outgoings can also be achieved by dropping grocery brands or switching energy and insurance suppliers to get the best deal.
These adjustments soon add up and help if your new year's resolution is to become more frugal or to save more money, in which case you might want to consider opening a savings account or reviewing your current savings account to put in the extra money. If a savings account is of interest to you, you could use our savings account comparison tool to see which savings accounts may meet your needs.
Before you start to save, it can be a good idea to pay off loans or credit cards first.
This is beneficial as it means you can save more and start from ground zero rather than your income being squeezed by savings and debt.
If paying off a loan or credit card is your goal for 2023, taking stock of where you are with loans or credit card balances is the first step.
There may even be some ways you can boost your income, such as setting up a side hustle or selling unused items. Then you can use the extra money to make larger repayments against debts. If this is something you're thinking about, we have a handy two-part guide on everything you need to know about starting a side hustle.
Checking and improving your credit score can also be essential to maintaining your financial health.
What is a no spend January?
A no spend January is a type of money-saving challenge or spending detox which has become popular in recent years. It means you commit to not spending any money on unnecessary items such as clothing, takeaways, or nights out.
The idea is only to spend money on necessities like bills and groceries. Some people enjoy taking it to the extreme - walking instead of driving to save on petrol or borrowing items from friends instead of buying them. No-spending challenges can be one of the best ways to save money, particularly if you encourage more friends or relatives to take on the mission.
Three simple tips for setting a personal budget
If you need help with budgeting, we are here to help with three simple tips for complete beginners to help with your money mindset.
- Calculate your income compared to your essential outgoings, including debt repayments, to see how much money you have left afterwards. Many budget calculator apps and loan repayment calculator websites are available to help you do this.
- Consider ways you can budget for spending, whether that be having an allowance each week or transferring the remaining money onto a prepaid debit card, so you know to use only that card for spending throughout the money.
- Try to put away at least a small amount of money each month for savings. You can increase this over time once you are in the habit.
Sticking to your financial resolutions
Of course, it is easy to make a New Year's Resolution. But it is much harder to see them through. Starting with small goals rather than a larger unattainable one is helpful when it comes to sticking with a financial resolution and learning how to save money.
Paying back a certain, sustainable amount off a credit card or loan over six months takes longer but is more manageable than clearing it in just a few weeks.
Visualising your goals - such as the pride and relief you will feel having saved £500 for an emergency fund - can also help make budgeting more fun. Reviewing your goal regularly and seeing the steps you have taken towards reaching it is also a great way to boost motivation. Put a date in your calendar to do this each month.
Writing down what you have saved or paid off and putting the document somewhere visible where you can see it as a reminder of what you are working towards.
There are some circumstances when you may need to do more than setting a budget or cutting back on spending to clear more significant debts.
If you are struggling, take a look at our expert guide on what to do and how to get help with your finances and then take steps to improve your situation and manage your finances better in the new year.
Look after the pennies and the pounds will look after themselves
Making the money you have work harder for you and controlling your outgoings can have several benefits. Those benefits might be clearing debt or starting a small savings fund at first.
But in the long run, sticking to a mindset of spending less could enable you to prioritise your spending on things that mean the most, from family holidays to retirement funds. Reducing the amount you spend on new clothes and plastic items such as toys can also be better for the planet.
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