With the cost of living increasing, many of us are looking for creative ways to budget our finances for 2022. The rise in energy prices, food bills and other goods mean people are beginning to cut back now to offset the extra cash they’ll have to pay out each month.
Here we’ll take a look at factors to consider when budgeting for the year ahead and beyond.
It’s all in the planning
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Whether or not spreadsheets are your thing, it’s useful to have a written plan or tracker of your finances, month by month. Split your outgoings into essentials such as rent, mortgage, childcare, bills, food and petrol and non-essentials like nights out, takeaways and treats.
Budgeting doesn’t mean denying yourself an evening at the pub, but it’s helpful to set a realistic limit on how much you’ll spend on any extras. Don’t forget to take into account any savings you want to put aside each month as well as occasions and events such as weddings, birthdays and holidays.
It’s also a good idea to check you’re paying the correct amount of tax – the more you earn the more tax you’ll pay depending on the bracket.
Improve your credit score
A poor credit score can impact factors such as getting a mortgage, taking out a loan and getting good interest rates on any credit you take out. It can be easy to fall into the trap of poor credit with things like missed payments, multiple loan applications, closing accounts or moving home regularly having an impact on your credit score. Having no credit history can also cause result in a low score.
Build your credit score by managing your finances, being on the electoral register, making payments on time and keeping your credit usage low if possible.
Future goals
If possible, think about what you want to achieve financially within the next few years and plan ahead for any big and costly investments such as buying a house, travelling, paying for children’s education or buying a new car.
Although it might seem a long way away, planning your finances now can help get you on the path to reaching your goals, whether through budgeting savings, a pension or other investments. This is particularly useful if you like the idea of living financially free in the future.
As with all personal goals, only you can make changes to how you spend, budget and save but remembering the reasons why you’re doing it can help you stick to your finance plan.
