With the start of a new year, you can now put the past behind you, writes JASON BUTLER. You can start again and have a sense of hope and optimism about the future. Here are five ideas that might help you make progress with your money in the year ahead.
1. Remember your big picture
With a constant barrage of negative news and stories of impending financial doom, it's easy to get overwhelmed and discouraged about improving your financial situation.
Young people have never experienced a recession or financial turmoil, so current economic conditions might have been a shock. Older people know that everything comes in cycles and lurches from extreme optimism to extreme pessimism.
As Professor Scott Galloway said on a recent episode of his weekly podcast, 'Nothing is ever as good or as bad as it seems.' So, viewing emerging economic conditions as necessary and normal is crucial. Bad times eventually give way to good times.
But more importantly, you also need to consider what happens over the next few years in the context of your entire lifetime.
2. Focus on habits more than outcomes
Many people focus on the wrong things when it comes to their money. They focus on financial-related goals rather than the daily behaviours and actions necessary to achieve those outcomes.
Focusing your attention and effort on developing positive money habits will give you a better chance of making progress.
Examples of positive money habits might include:
Make a packed lunch one or two days a week and then put the money saved into a separate savings account.
Review your spending each week to spot waste, overspending and unwanted subscriptions.
Put money allocated for 'fun' things in a different bank account and only use a card linked to that account for that spending.
Have a 'money date' with your partner each month to talk about your finances and agree and take decisions jointly.
Always ask yourself before you buy anything, 'Do I need it? Can I afford it? Can I buy it cheaper?’
Save unexpected cash windfalls for a minimum of 30 days to get used to holding the extra money and reduce the urge to spend the money on things you don't need.
3. Look for ways to become more valuable
The bigger your shovel, the more snow you'll shift. And the same is true of your income.
Inflationary times mean that growing your income is essential to getting ahead financially. If you can't trim expenses any further, you'll need to earn more.
Your income level is generally associated with the value you bring to the world. But few people know how to maximise their value or what options are open to them.
For example, I know a chap who is an Emergency Care Assistant in the Ambulance Service. While he loves his job, he finds the salary isn't enough. But if he trained to become a paramedic, his annual salary would rise by around £10,000 and set him up for further salary progression and associated pension benefits.
Another good example is my eldest daughter. After graduating and working as a website developer, she took an intensive software engineering course over 12 months, which she did in her spare time. This enabled her to get a job as a software engineer and improve her annual salary by £16,000, with prospects to earn substantially more with experience.
Questions to ask yourself regarding improving income:
Could you take on additional responsibility in your current job for a higher salary?
Could you earn money in your spare time doing something you love and are good at?
Would moving areas increase your income-earning capability?
Would becoming self-employed allow you to make more on terms that suited your lifestyle?
Could you help your employer justify a salary rise for your current job based on evidence of the going market rate, demand for your skills and the value you deliver?
How much could you increase your prices (if you are self-employed or in business) without affecting demand?
Is there an additional product or service you could offer your clients or customers?
4. Be clear on what 'good' looks like
Manifestation is the process of making something happen through belief and attraction.
While this might sound a bit woo-woo or out there, it can help you get what you want. But the key is you have to be clear about what you do and don't want in your life. My experience is that few people have that figured out, so they drift along and miss opportunities that could improve their financial well-being.
When I was in my early 30s and still in debt, I defined my ideal life as:
Paid work is optional and I work because I want to
No personal debt
Children set up financially
Can give money and time to causes I care about
Maintain mental and physical fitness
My ideal lifestyle didn't mean I lived like a monk along the way, but it influenced my work ethic, desire to take risks and what I choose to spend money on.
So take some time to write down what good looks like to you in simple terms. You could describe your ideal lifestyle or just how you want your finances to be at the end of the year. The principle is we get what is important to us and that we focus on.
5. Have milestones, not rigid goals
While having a clear idea of what 'good' looks like in terms of your lifestyle and wealth will give you a sense of direction, I don't recommend that you have hard and fast life or financial goals.
Instead, I favour having milestones. Being goal-focused can cause you to put off your happiness until you reach the goal. And when we do achieve the goal, we tend to ask ourselves, 'What now?' and the whole cycle repeats. Or you don't reach the goal, feel like a failure, and start to lose motivation and confidence.
A milestone is a measuring point on the progress you've achieved. It's more forgiving and allows some flexibility over dates, amounts and substance.
Milestones tell you if you are on track or veering off course, so you can change your daily financial habits and behaviour.
Whatever 2023 brings you, I hope the five ideas above help you improve your financial situation so you worry less and enjoy life more.
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