New research commissioned by StepChange suggests a steep rise in the number of people in Scotland turning to credit to help pay for Christmas this year. Squeezed household finances and the highest level of inflation for decades have resulted in fewer than one in five (18%) of Scots saying they would comfortably be able to afford Christmas this year, compared with 44 per cent last year.
The survey by YouGov for StepChange Scotland found that nearly one in three (30%) Scots expected to struggle with finances over the festive fortnight with 31 per cern admitting to cutting back on their normal expenses to fund seasonal spending. The ongoing cost of living crisis was attributed as being the main reason for a shift in attitudes towards spending.
If you’re worried about managing your money in the new year, the 50/20/30 rule could help you stay in the black and keep your finances on track. This is a simple way of prioritising how you spend your hard-earned cash.
Here are six ways to make you more financially savvy in 2023.
Follow the 50/20/30 rule
If you’re not sure how much to organise your household spending then a good place to start is to follow the 50/20/30 rule.
This can be tweaked so suit your household habits, especially if you’ve already cut back on takeaways and dining out as a result of soaring energy bills, food prices and inflation.
The basic 50/20/30 rule:
- Spend 50% of your income on essentials such as housing costs, food and energy bills
- Spend 30% on the fun parts of life like shopping, takeaways and dining out
- Set aside 20% for savings, long-term goals, paying off any debts or a future emergency fund
Saving for a rainy day
Having a safety net of savings that you can rely on is not only useful for relieving the stress of unforeseen financial changes, it can also help give you the confidence to take a risk or make a change that will improve your overall quality of life - whether that’s pursuing a new career you’re passionate about or even starting a family.
It also provides an overall sense of reassurance that can help to prevent the persistent feelings of stress that a lack of financial security can contribute to.
If you want to build your savings but are unsure how much you are able to save, it is worth considering an instant-access savings account that is linked to an existing debit card. For those who are confident about the amount they can set aside each month or for those who fear they will be tempted to spend their savings, opt for a fixed-term savings account or ISA.
Avoid spending surprises
There can be no greater shock than checking your bank balance and finding it a lot lower than you expected, especially on the run-up to pay day.
It’s an all-too-common occurrence that can trigger panic and stress, especially if you have unwittingly dipped into an overdraft or need to dip into savings to get through the rest of the month.
Overspending is much easier when you don’t have a budget to stick to, so it’s important to create a realistic budget and stick to it. Set aside 30 minutes to review your incomings, outgoings and general expenses on or before each payday. This will help you to gain a clearer understanding of how much money you have to spend on both the essentials (rent or mortgage, household bills, food and transport to work) and the luxuries (a takeaway or night out).
Then, you can establish an allocated budget for each of your outgoings, including your disposable income. This will help you to manage your spending, feel more in control of your finances, and avoid having to scrape pennies together at the end of the month.
If you find sticking to a budget difficult or don’t have the time to keep checking your outgoings, try transferring your weekly allowance from your main current account to a card dedicated solely to spending that will send your phone a notification after each payment.
Start talking
Talking about money remains a bit of a taboo subject for many people. However, while lots of people might feel uncomfortable initiating a conversation that revolves around money or financial concerns, talking to someone about these topics can help to alleviate the stress surrounding them.
If you are concerned about finances or simply want to share your money worries aloud, seek out a trusted friend or family member and get it off your chest. But, if you don’t feel comfortable talking to someone you know about it, then there are plenty of listening services, helplines and online support you can turn to.
StepChange, Citizens Advice, Advice Direct Scotland and Christians Against Poverty all offer free, confidential and impartial advice and could help connect you to other organisations that can help with specific money worries.
Save and budget for your fun fund
The ongoing cost of living crisis may have put the brakes on many big spending plans for the foreseeable future for many households.
While it’s great to establish long-term financial plans and make progress towards those, try not to fixate on these goals too much or feel guilty about spending your hard-earned money.
Whether it’s a bigger splurge such as a holiday, a year-round expense such as a gym membership or simply a monthly treat, it’s important to set aside savings, or have space within your budget, for your ‘fun fund’.
This should be used to cover - within reason - the expenses or little rituals that help boost your mood and relieve the stresses of daily life.
Get to grips with the lingo
For those who don’t feel confident with financial vocabulary, putting plans into action that involve your personal finances can be daunting and stressful, whether that’s booking a mortgage appointment, building your investment portfolio, or deciding what financial products match your needs.
However, just because you aren’t completely up to grips with the jargon, you shouldn’t let that intimidate you from taking your personal finances to the next step.
Subscribing to financial apps, speaking to professionals and tuning in to finance podcasts and videos are all great ways to improve your financial literacy and help you feel less overwhelmed by it, and reduce stress.
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