Recent data published by the Financial Conduct Authority (FCA) suggests that 7.8 million people across Great Britain are finding it increasingly more challenging to keep up with their household bills, a rise of around 2.5 million since 2020. The research shows that one in four adults are in financial difficulty or believe they could quickly find themselves in difficulty if an unexpected cash emergency popped up.
As the end of another month approaches, it offers a perfect chance for many people to make some changes for the new one ahead and if you already set yourself some money goals at the start of 2023, it's also a good time to see if you're sticking to the plan or if it needs a bit of tweaking.
Personal finance expert Holly Andrews, Managing Director at finance broker KIS Finance, shares simple steps everyone can take to get their finances sorted quickly, which can help shape your spending habits for the year ahead.
10 ways to get your finances back on track
1. Set your main goals for the ret of the year
Before you do anything else, it's important to decide what your main financial goals are for the rest of the year. This could be saving for something specific like a house deposit or family holiday, building up an emergency fund or significantly reducing or paying off your debts.
Whatever it is you want to achieve, having this in your mind from the offset will steer you in the right direction.
2. Review January and February spending
If the goal is to make significant changes to your financial position, then it's important to review all of your transactions from the start of 2023 going back to the early last year - however far back you want to go depends on changes you've already implemented - this is so that you can track progress or figure out how you got into your current position in the first place.
Collecting your bank statements, receipts and bills and looking through them thoroughly will allow you to see where you are spending unnecessarily and where you can start to cut back and make some savings. You can also review all of your accounts to see what's working for you, what's not and where you can maybe get better interest rates. Once you've done this, you can start to make a plan.
3. Create a realistic budget
'Create a budget' is something you hear so often, but it really is important to do if this is something you haven't done already. A lot of people associate the term 'budget' with strict rules on spending and various other restrictions.
But actually, a budget can be used to monitor your income and outgoings, regulate and keep track of your spending, help you to pay off debt and help you to save money. Creating a budget is the first step to organising and re-gaining control over your finances if this is something you've been struggling with.
If you already have a budget in place, now's the time to review it. No budget should ever be set in stone income changes, bills change, and needs change so you need to keep your budget up to date.
4. Review your credit report
If this isn't something you do regularly, now is a great time to have a look over your credit report. You need to check for any discrepancies in personal details or account information as well as make sure that everything is up to date. It's also a good way of viewing your current financial standing, and credit reference agencies will sometimes even give you advice on what changes you can make to improve your score.
You can also use your credit report to make sure you haven't fallen victim to any kind of identity theft which could be negatively affecting your score, such as someone applying for loans and credit cards in your name.
5. Automate outgoings
Automating your bills and other outgoings is a great way of keeping everything on track - as long as you can keep on top of the regular payments. Having payments leave your account automatically via a direct debit or standing order means you won't forget to pay a bill, transfer money into your savings account, or add to your investments.
You should especially automate the minimum payment for your credit card or any other debts each month. You can still manually pay off more than just the minimum payment, but having the minimum payment automated will mean that you won't be adding to your debts by being charged for late or missed payments.
6. Consolidate your debts
If you have multiple debts e.g. credit cards, personal loans, and store cards and you're struggling to keep track of everything then it may be time to think about a debt consolidation loan.
Debt consolidation is when you clear up all of your debts by transferring them to one loan, so therefore a singular, and hopefully much lower, monthly repayment. You can get debt consolidation personal loans and credit cards, but the best interest rates and terms are available with secured loans.
Secured loans offer loan amounts from £5,000 to £2.5 million with terms of up to 25 years, most personal loans are capped at around 10 years. Longer loan terms and lower interest rates often make secured loans more affordable than personal loans. Secured loan lenders are also more lenient towards applicants with a chequered credit history so you may still be able to get a secured loan even if you have been turned down by other lenders due to poor credit.
7. Review your bills, direct debits and standing orders
It's really important to regularly check through your direct debits and standing orders to make sure that you're not paying for any products or services that you no longer use or need. This could be anything from forgotten subscriptions and gym memberships, to vehicle or home insurances that you no longer need.
You should also check whether you're getting the best rates and prices for all of your bills. It's a well-known fact that loyalty doesn't necessarily pay off when it comes to things like gas and electricity, car insurance and broadband providers. Companies like these will often have deals to attract new customers, so this is definitely something you can take advantage of.
Doing a simple comparison online will show you if you're paying too much on any of your bills and where you can get them cheaper.
8. Switch your bank account
Another thing you can do is to have a look and see if your main bank account suits your financial needs. If you've been using the same bank forever, it can be easy to forget to look at what other banks are offering.
Modern banks offer so many things now, for example, the ability to automate savings and round up your transactions. Some also allow you to earn rewards for your spending.
Most banks also offer incentives for switching over to them. While bonuses like these shouldn't be the deciding factor to switching bank accounts, they can certainly sweeten the deal if you're considering it anyway.
9. Get a better rate on your savings
If you've already got some savings, now may be the perfect time to check whether you're getting the best interest rate and the best return on your money.
10. Review throughout the year
Once you've done everything you can to get your finances in order, it's important to then stay on top of everything especially in a time like this where interest rates and the cost of living are ever changing. It's not something that you want to be doing all the time, however, reviewing things every three or four months will make sure that you're still heading in the right direction.
Your next review should be before summer, so that you can make any adjustments before the holiday season begins.
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