How to hack your finances in 2020, from starting a f***-off fund, to doing a subscription cull
Scared of looking at your bank balance? Time to make a change
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Your support makes all the difference.If your pockets are feeling a little light after Christmas spending, you’re not alone.
After health and fitness aspirations, saving money is the second most popular New Year’s resolution according to research undertaken by Ford Money, yet only 22 per cent of people keep their pledge until the end of the year.
To help you stay on track for the year, we've consulted financial experts to reveal some of the best – and easiest – ways to make your money work harder for you in 2020 and kick off the year with your finances fighting fit.
1. Deal with debt
In a bid for financial security, it might be tempting to jump straight into a spanking new savings scheme come the first week of January, but sometimes addressing outstanding debts first is the best way forward.
Grace Brownfield, senior public policy advocate at StepChange Debt Charity, tells The Independent: “If you’re carrying a lot of debt, it’s worth going through a budgeting exercise to see whether you can afford to make additional payments to reduce it.
“Having a savings buffer for a rainy day is valuable and important, and really reduces the risk of problem debt – but repaying expensive credit may need to be a higher priority,” she said.
If you’re struggling to reduce your debt or manage your repayments, Brownfield advises seeking expert help.
“If you can’t afford to reduce your debt, or if you’re in a situation when your debts are worsening, that’s the time to seek advice from an independent, trusted advice charity.
"People who enter debt management plans, where their creditors agree to them repaying their debt in an affordable way over an extended period, are allowed to set aside modest sums for savings to help build up a rainy day fund for unforeseen contingencies," she says.
If you’re struggling with debt, you can access free debt advice online 24/7 stepchange.org.
2. Start saving (realistically)
If you’re saving for something special or simply want some additional financial security, start small with the 1p Saving Challenge.
It starts with saving a single penny on day one. Each day, add an additional penny to the pot, e.g. 2p, 3p, 4p – right up to £3.66 by the end of December 2020 (this year is a leap year so you’ll have 366 days to save). Come New Year’s Eve, you’ll have a grand total of £671.61. This is an easy way to start to build a nest egg – or be the most popular person in the pub when 2021 rolls round…
3. Consider a f***-off fund
It might sound hostile, but a f***-off fund or emergency pot of money is a wise thing to have, particularly if you’re a woman.
What is a f***-off fund?
Paulette Perhach coined the term to described a pot of money that a woman can use to escape an unhappy situation, be it a relationship, job or house share.
Acting as a safety net, the f*** off fund may prove to be the decisive factor in having the option of leaving or having to stay put because of financial concerns.
Sophie Phillipson, founder of graduate support network HelloGrads, tells The Independent: “This sort of ring-fenced, rainy-day fund is especially important for self-employed or entrepreneurial millennials whose income can fluctuate in the gig economy. It’s also a psychological safety net, which can be a huge comfort in the face of job insecurity.
“A healthy f***-off fund should be able to support you for up to three months – enough time to get your life or career back on track – so make that figure your savings target.”
4. Make a budget
Creating a budget might seem dull, but it’s of major benefit in the longer term. Having a clear sense of the money you have coming in and out will help you get control of your finances.
Write down all your expenditure, including necessities such as food, housing and transport, plus extras such as gym membership, entertainment (nights out, cinema, gigs), holidays, clothes and birthdays. Be honest and accurate – it’s the only way you’ll be able to make real changes.
Tina Harrison, professor of financial services marketing and consumption at University of Edinburgh Business School, tells The Independent: “Budgeting is crucial to get control of your money and fundamental for good financial health.
"There are many budget planning tools available to help you out with this. The Money Advice Service is a good place to start," she says.
“Increasingly, mobile banking apps, such as Monzo, include a budgeting tool, which categorises your spending for you,” she adds. “Recent research suggests that using a budgeting app really does make a difference and can help to meaningfully reduce spending.”
5. Audit your online subscriptions
According to research conducted by Marcus by Goldman Sachs, almost a third (29 per cent) of UK adults are spending £120 every year on unwanted policies, subscriptions and memberships that they haven’t cancelled. From a survey of over 2,000 people, they found that forgetfulness was the major reason for people continuing to pay for unwanted services.
Check your bank statements for any old direct debits that you can cancel, leaving you with some extra cash in your pocket. If you’re signing up for a free trial, Marcus recommend setting a calendar reminder to ensure you cancel before the first payment is deducted from your account.
It’s also worth speaking to people you live with to see if you can reduce costs by sharing online membership packages or signing up to a household package instead.
6. Approach ‘buy now, pay later’ options with caution
The possibility of shopping using ‘buy now, pay later’ options such as Klarna might be on the rise, but be careful, warns Anthony Morrow, CEO of OpenMoney. “Buy now, pay later credit providers tap into the FOMO (fear-of-missing-out) mentality to give consumers access to what they want, when they want it,” he says.
“On the surface, this provides a quick and easy way to get your hands on the next ‘must have’ items, but in reality, these are just a shinier version of the maligned ‘rent to own’ schemes that can – in some cases - leave people in catastrophic financial situations.”
Morrow states that debt is debt, no matter what form it comes in.
“Essentially, these facilities are simply shuffling debt from one place to another,” he says.
“Rather than debt on credit cards, it’s debt with new schemes. Regardless of the guise of the provider, the buck will always stop with the customer, especially when terms and conditions aren’t read and payments are missed."
He recommends saving for wish-list items, rather than splurging and spending money you don’t have.
7. Give something up
Align your financial objectives with your New Year resolutions by counting the cash you save from giving something up in another area of your life.
According to the NHS, the average smoker is set to gain £128 each month from giving up, totalling over £1,500 a year.
Alternatively, consider switching your weekly takeaway to a fortnightly treat, a move which has the potential to save you over £200 every year.
8. Switch off social media and save
A study of over 1,000 people by Credit Karma in 2019 revealed that seven in 10 millennials have gone into debt trying to keep up with social media trends.
People tend to post the perfectly filtered parts of their lives that they want you to see, which can make it hard to establish a clear sense of what’s realistic and achievable – and what’s not.
If you’re the kind of person who’s influenced by what others are doing and spending, switch off social media and give yourself a break. As well as benefitting your bank balance, it’s also good for your mental health.
9. Invest
If you’re lucky enough to have more cash to splash, make your money work harder with an investment.
Anna Murdock, head of wealth planning at JM Finn, tells The Independent: “It is a common misconception that investing in financial markets is the reserve of the wealthy. We urge everyone to consider investing as early as possible, no matter how much they can afford.
“Whilst there are no guarantees, a fully diversified stock market portfolio can build significantly over time thanks to compound interest. It is never too late to start!”, she says.
Struggling to know where to begin? Contact an independent financial advisor for professional advice on how to make the most of your cash. Find one in your area using this search tool.
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