Saving money can be challenging, but there are certain steps a person can take to make the process as easy as possible. In doing so, Britons can strive for a new version of themselves financially in 2022. Emma-Lou Montgomery, associate director at Fidelity International, provided a series of steps Britons should be taking to harness their finances in the new year.
The first, she said, is navigating rising living costs which are set to soar in the coming year, particularly with inflation on the rise.
Higher National Insurance and frozen Income Tax rates also have to be taken into account by Britons.
Ms Montgomery has urged people to ready themselves for higher borrowing and living costs, and this can be achieved through an ample budget.
Creating a budget and giving this attention and careful planning, particularly with prices, is especially important.
Another key consideration is a mortgage, one of the biggest financial responsibilities a person can take on within their life.
The era of ultra-low mortgage rates is rapidly drawing to a conclusion, Ms Montgomery warned, and action will need to be taken by Britons.
She added: “Those on tracker rates or their lender’s standard variable rate – as well as those with other loan or credit card debts that are not fixed – can expect to see an instant rise in their costs should interest rates rise in December.
“It’s critical homeowners review their loan terms to avoid any nasty surprises. The knock-on impact to repayment costs will depend on your rates now, the size of your outstanding loan and the term of the mortgage.
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“A borrower with £150,000 outstanding over a 15-year term currently paying a rate of 1.5 percent would see their repayment climb by £17 each month if their rate were to rise by 0.25 percent.”
To revolutionise one’s finances in 2022, it is especially important to resist the urge to max out on New Year subscriptions.
Many people will make New Year’s resolutions which may involve spending on subscriptions such as the gym, wellness apps or healthy eating plans. These are particularly promoted over the festive period.
However, before signing up, Ms Montgomery said it is important to think about the impact an additional direct debit could have on a person’s finances.
Being realistic about how much a person will spend is likely to be key, particularly if someone can find more cost-effective options.
For some individuals, a new year could mean a new job role, and while it is easy to get carried away with excitement, there are issues to consider.
One such matter is travel costs, which have been significantly reduced for many individuals during the pandemic and lockdown.
Ms Montgomery said: “It’s important to factor in the likelihood of rail fare increases. Earmark the start of January so you’re prepared for the potential rise and set aside some time to map out what ticket type is best value for your money.
“Flexi-season tickets may be the best option, providing savings for a limited number of days to and from the office.
“Any leftover cash could be diverted towards other outgoings or future savings.”
A fifth key point to consider when it comes to finances is retirement savings, which Ms Montgomery stresses should be a “priority”.
The end of the year should be used to reassess retirement savings by asking important questions, particularly about a person’s goals.
It is not just retirement itself, however, but the cost of care or supporting loved ones financially which often need to be taken into account.
Ms Montgomery concluded: “Make time to revisit your retirement goals so you have a clear trajectory to get there, map these against your income and current job security and, if needs be, draw up a financial plan to boost your savings from January onwards.”