Money mistakes that you could be making when building your savings

How many New Year’s Resolutions did you make this year, and how many have you already broken?

Every year, millions of us make resolutions, but often we’ve given up even before the tree has been taken down.

January 9th, which has been called ‘Quitters Day’, is the point when people are most likely to give up their resolutions, only keeping them up for just over a week of the new year.

From weight loss and increased exercise to better budgeting and de-cluttering, resolutions are designed to improve our lives and banish bad habits, but when it comes to money, just why is it so hard to keep these new habits in place?

Unrealistic expectations

One of the main reasons financial resolutions don’t work is that we choose something that isn’t realistic. 

If you’re trying to save, for example, and you decide to cancel all the streaming subscriptions that you’ve regularly used until now, it’s going to be hard to stick to this decision, and there’s a high chance you’ll sign up again by the end of January.

Instead, review the different subscription options available, like getting a reduced rate by seeing more ads on the service. If you have a few of them, cancelling one or two and alternating between them will also save you money, and you’re not having to make too many lifestyle changes.

Another reason resolutions don’t work is that they are too vague and don’t include specific things you can change, like if you make a resolution to ‘save more’, for example.

Here we look at how, with a few easy steps, you can give your finances a reality check and make some permanent long-term changes to boost your cash flow.

How to make financial resolutions stick

1. Be specific

Goals need to be clear and focused, ideally those which you can action out and tick off a list. If your goal is to build your savings, working out where your money is going is the starting point. You can do this by looking at your bank balance over a normal month and identifying where you can cut back.

You can do this manually, if you have the time, but there are also several apps which can do it for you. Plum, for example, is a smart money app, and it uses technology to analyse your spending. 

When you sign up and allow it to, it can connect to your bank accounts and calculate how much you can realistically start saving each month. This is then automatically transferred to a savings account of your choice, taking the legwork out of having to do this on your own each month.  

2. Make small changes

There’s a much higher chance of sticking to one small change than transforming your life just because we’re in a new year. These small changes you need to make will depend on your financial goals and your situation.

If your goal is to buy a house this year, opening a savings account could be the first change you make. If it’s to pay off expensive debts, choose one debt at a time and go from there.

Or if you want to be more in control of your money, using an app like Plum to analyse your spending – so you know exactly where your wages are going each month – is another easy win.

Members of Plum can also use its Auto-Savers to make small changes. One asks savers to put an extra penny away every day of the year (this is for paid subscribers). Over a year, this could leave you with £667 without having to do much at all.

Not only are you more likely to succeed with small changes, but when you complete these tasks one at a time, this will also boost your motivation to continue.

3. It’s not just for the New Year

Small regular financial checks can make a big difference. Setting aside a day every month, for example, to review your finances or even a date every three months to look over how your savings plans are going is far more sustainable.

You may think you’re cutting back, for example, but if you’re still eating out several times a week, you’re probably overspending. Similarly, if you’re out of contract with your broadband, you’re unlikely to be on the best deal. 

With regular check-ins on your finances, you’ll be able to quickly spot where things are working and where they’re not.

4. Choose changes that are easy to start – and continue

Most of us don’t want to spend a lot of time looking over bank statements or checking how much interest we’re earning on our savings, so using a tool that does this for you can increase your chances of sticking to new habits.

Over two million people have used Plum, and it’s easy to see why. One of the great features of the app is the Auto-Savers, where money is automatically taken from your bank account and put into a savings account.

The app automatically saves money for you, encouraging you to adopt new savings habits and to remain consistent. Then by the end of the year – or earlier, depending on your plans – you could have grown a small or big nest egg which you’re free to use as you like.

You pick the account the money goes to, and there are several to choose between, from standard savings accounts and cash ISAs to investment ISAs if you’re keen on putting your money into the stock market. (Capital at risk when you invest. Investments can go down as well as up, so you might get back less than you put in).

5. Be flexible

Nothing in life is set in stone, and it’s important to be flexible with financial plans and goals. You could get a pay rise, receive a lottery win, or a windfall from a long-lost relative, but similarly, you may lose your job, your car could break down, or your roof could need fixing.

Having an emergency savings pot is key here, to fall back on for unforeseen things that could happen. With this back-up savings pot, you’re less likely to take out debt, too, which can be stressful and expensive.

With Plum, you’re able to easily change the amounts you save – at any point – so if something happens and your income changes, for example, you can lower the amount you’re putting away that month.

This feature allows savers to still put money away without any extra financial pressure or worry of not having the funds if needed. It also means that as financial goals change, you can quickly and easily tweak your savings to reflect your new goals.