How to detox your finances this year

It’s always a good idea to take a look at your finances – particularly if it means you can have a wealthier year ahead. A few quick moves mean you can cut your outgoings, boost your income and ultimately boost your savings – which will make your future self richer.

Follow this plan to detox your finances. You can do them all at once, or do one a week to work through your financial to-do list.

Step 1: Tackle your debt first

The first place to start with any financial plan is dealing with debt. Take a look at all the debt you have, from credit cards, overdrafts, personal loans, buy-now-pay later and store cards (don’t worry about mortgage or student loans for this). You’ll want to add up all the debt and list the interest rates you’re paying for it.

Then you’ll need to do a few things. Firstly, make sure you’re paying the minimum repayments each month on all your debt. Secondly, switch to a cheaper deal if that’s possible. Shop around to get the cheapest debt you can get – the less interest you’re paying the more of your repayment will go towards the debt and not just the interest. Thirdly, work out a plan to repay the debt. A good plan is to pay off the most expensive debt first, but you could opt to tackle the smallest bit first – if you think it will motivate you to pay off more.

If in doubt get some debt advice – there is lots of free support out there if you’re really struggling or want help putting a plan in place.

Step 2: Cut your costs

The best way to boost your budget and free up money to save is to cut your costs. Lots of people will have done this throughout the cost of living crisis, to attempt to keep a lid on rising costs. But there may still be some quick wins. Look at things like subscriptions you’ve signed up to that you don’t want anymore (or weren’t even aware you had). Check any subscription that you do want to keep and see if you can cut the cost: whether it’s your mobile phone bill, broadband, TV package or food service. Beware of the auto-renew: lots of insurances will auto-renew, and at a far higher cost than if you shopped around. Make a note of when your house, car, travel or other insurance renews so you don’t let it automatically roll over.

Step 3: Work out your budget

Budgets can be boring – but they are a necessary evil to make sure you’re not spending too much – and to free up money to save or invest. The basics of this mean you’ll need to list out what you have coming in every month and what you have going out. If you’re spending more than you earn, you’ll need to work out where you can save money. The good news is that lots of digital banks will take the hard work out of this for you – by showing where you’re spending your money, how much you spend and what subscriptions you have. If you’re still overspending after cutting your costs (above) you’ll need to work out what you’re willing to sacrifice to balance the books – whether that’s the gym, some nights out, or something else.

Step 4: Boost your income

If you’ve cut your spending, another way to boost your finances is to increase your income. That could be asking for a pay rise in your current job or working out a way to move jobs so you can earn more money. Alternatively you can supplement your income, by taking on extra work, selling stuff on the side, starting a side hustle, renting out a room or renting out your driveway – there’s a whole host of options.

How a side hustle can boost your income

Step 5: Get free money

Another way to increase your income is to claim money you’re entitled to. That could be claiming benefits you’re entitled to or help with childcare costs, such as child benefit or tax-free childcare. If you’re bamboozled by the system then contacting Citizens Advice is a good first port of call, as they will be able to help you work out what you might be missing. Another option is getting free money from switching bank accounts, or using cashback websites or debit cards. Or use refer a friend deals for services you already use to earn a little bit of extra money.

Step 6: Start the savings habit

Hopefully all the previous steps will have freed up some money for you to save or invest each month – remember you can start investing from just £25 a month, so you don’t need to have thousands stashed away to get going.

The best way to make your saving or investing successful is to work out what is realistic to save: you don’t want to overcommit and then have to take money out of savings every month in the few days before payday. Starting small is a great way to get into the habit of saving, and you can build it up as you get a pay rise, a bonus or free up money elsewhere. Once you’ve got into the regular habit of saving you might find yourself very motivated to boost the amount and increase your savings.

If you’re sticking to cash you should always get the best rate possible for your savings. Shop around for the best deals and don’t leave your cash dwindling in an old savings account or in your current account earning nothing. If you’re making the effort to save your money you want to make sure the bank is giving you the best return on it.

Lastly, think about why you are saving. If it’s for an emergency fund or money you’ll need in the next few years then you’re best to stick to cash. But if its for the longer-term then you should think about investing it instead for potentially higher returns. Check out more of our articles to get all the info on investing.

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