It’s that time of year when everyone is planning their year and what they want to achieve. These often include aims to do with work, fitness, travel and money. I’m going to run over some useful and achievable personal finance goals you can achieve in 2016 and ways to get there.

Understand your finances

It’s crazy how many people don’t actually know what’s going on in with their own finances. Do you know exactly what makes its way into your bank account every month and what goes out? If so, you’re ahead of a lot of people. And if not, then start taking an interest in it. And secondly, do you know what sort of a credit score you have? You don’t need to know the exact number but a rough idea is good. If you have a low credit score then you’re more likely to be turned down for credit cards, mortgages, loans or even a mobile phone contract. You can sign up for a free trial with Credit Angel (powered by Call  Credit) to find out what your credit score is, and follow our tips if yours isn’t looking green. Please note that a charge will be payable after the free trial.

Please note: We recommend Credit Angel but we do receive a commission if you sign up to a trial.

Budget

Remember, budget doesn’t mean ‘stop spending’, it just means managing what’s coming in vs. what’s going out. And here we mean not spending more than what you earn each month or week or year. There are plenty of tools out there to help you manage your household budgets, but it’s just as easy with a pen and paper. Write down the amount you earn each month (through employment, benefits, dividends, whatever this happens to be), then write a list of all of your regular outgoings (rent/mortgage, electricity, phone bill etc.). This is essentially your household budget. The only way to make the positive gap between the two bigger is to earn more and/or spend less. You can use the Citizen’s Advice tool to help, and they also offer help with managing your budget if you think you need it.

Pay off debt

With measly savings rates at the moment, it’s more than likely that the interest on your debts is more than the interest you’re earning on your savings, but you can make sure with Money Saving Expert’s useful debt vs. mortgage overpayment calculator (it works the same way for savings accounts, just remember that ISAs are tax-free). If this is the case then you’ll be better off paying off the debt first than saving money for other purposes, see why in this article.

Save money

If you’ve done both of the above (budget and pay off your debt) then hopefully you’ll have some money left at the end of the month (or beginning of the month if you’re budgeting properly) to put away for a rainy day, or for a particular purpose. Sensible advice is to build up an easy-access pot that is about equal to 6-months of your current income first, this will bail you out if you have issues with your employment, the boiler needs fixing, the car conks out or some other unexpected event happens. Then after this you can choose whether to save for a holiday, a house, children, your retirement etc. And make sure you are strict about not touching this money unless the reason falls into the category that is assigned to it. If you struggle with this, put it in an account you can touch for a year, or longer. Then you can start playing with your savings more; regular savings accounts, fixed rate accounts (for longer periods), premium bonds, peer-to-peer lending etc.

Make your money work harder

Some of you might think this is the same as saving money, but it’s not. Save means adding more to your savings. But for one reason or another this might not be possible for you and if this is the case, then make the money you do have or do earn work harder for you. And if you do have savings then you will want to make them work harder too! With Bank of England rates at record low rates, it’s a good time for borrowers, but not for savers, there are actually some savings accounts that could be earning you as little as 0.01%, that would be 1p of interest on £100 in 1 year! At the moment, the best interest rates are actually on current accounts, such as those with TSB, Nationwide and Santander. Remember that unlike ISAs, you pay tax on the interest you earn with these, although rules are changing and from April you will be able to earn £1,000 interest tax-free each year.

Enjoy your money

Make sure one of your budgeted items is a treat, although this doesn’t necessarily have to cost a lot. If a luxury all-inclusive holiday in the Maldvies is your idea of a treat then make sure you budget to get there, but if your treat is a cup of coffee and slice of cake at a café, then equally make sure your budget allows you that. Managing your money is a little like managing your weight, the more you restrict yourself, the bigger the fall when/if it happens. Well, I know that if I’m restricting my food treats then I’m more likely to eat a whole chocolate fudge cake rather than one slice, you get the picture. So make sure you make allowances in your budget for some rewards.

Happy New Year! And happy new year’s resolutions. . .