The start of the new year often inspires people to take up a new hobby, quit a bad habit or change their general outlook on life. It can be a great catalyst for people who have been wanting to make a difference for a while but have perhaps lacked the motivation to do so. On the other hand, some people can find it difficult entering a new year if it means leaving loved ones or things behind. Covid-19 has made the last two years difficult and trying to force a positive outlook can feel overwhelming.
Whether you welcome the New Year or can’t wait to get past it, there is no need for you to change; New Year’s resolutions are really only a social construct, and you only have to pay attention if you think it will help you. However, one thing we can all work on as we start 2022 is our finances. Even if you’re not struggling daily, feeling financially stable and building your financial resilience is a worthwhile task and if you’ve been waiting for a sign to tackle your money management, this is it.
Why is it important to have good financial resilience?
Financial resilience is your ability to recover from cashflow shortfalls, income shocks or large financial impacts. Life can throw you hurdles at any time, but if you’re not financially prepared, these hurdles can hit you hard. While the initial shock may not be detrimental, the knock-on effect can cause financial difficulty that could span months – or years. It often takes a while to build your financial resilience to a sufficient level, but it doesn’t mean you have to commit to restricted spending or become paranoid about money. Healthy money management is about keeping control of your finances while maintaining a good quality of life. Your financial resilience feeds into this significantly.
How can I get better at managing money?
Often, the biggest impacts come from the smallest of changes. Adopting small daily habits is likely to have a bigger effect on your finances than trying to make one massive change – especially as you’ll probably feel resistant to drastic changes as it might mean sacrificing the things you like or making life more difficult for you. For example, you could sell your car and cycle to work. The money from your car sale might help you pay off some existing debt, increase your emergency fund to help in times of financial need and make you feel like you’re more in control as you have a (temporarily) healthy bank balance. But while cycling to work is free, it might take you considerably longer, it’s more dangerous if there are no dedicated cycle paths and it might cause you to resent going to work which is going to affect your mental health and day to day moods. In the long run, this kind of change is probably not going to have your desired effect – especially if you then need to buy a new car further down the line.
Instead, if you started car sharing or you only cycled to work on sunny mornings, you won’t reap instant financial benefits, but these changes are sustainable which means you will be able to maintain them. The small amounts of money you’d save would slowly add up. If you made little changes like this in all areas of your life, your finances would slowly improve as you have more disposable income to use against cashflow issues.
Of course, there are always ways to save a larger chunk of money more quickly, and this might include switching utility bill providers, broadband services or even searching for a new insurance quote instead of proceeding with your renewal premium. These kinds of changes could save you hundreds of pounds in a relatively short period, but they aren’t things you can do all the time, which is why regular money saving habits are also important.
Why should I prioritise my finances?
Outlining your priorities is characteristic of the New Year. Sometimes we need to rejiggle what we feel is important to us and try to leave some of the peripheral concerns behind. Prioritising your finances can actually relieve stress as it reduces your money-related worries. Instead of searching for urgent cash loans when something goes wrong, you can rely on your emergency savings funds and feel secure in your ability to deal with the issue before its affects worsen.
The New Year is not welcomed by everyone, but regardless of whether you think resolutions are the way towards a better life, change happens even if you only take little steps. Why not try to make 2022 your best financial year yet?
