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New Year, new budget

22 Feb 2021

budgeting

It is unsurprising that the latest survey of British households highlighted large declines in household income due to Covid-19. The measures introduced to contain the Covid-19 pandemic have seen dramatic budget changes for households across Britain.

Workers who were furloughed – and self-employed people – experienced a sudden reduction in income, in contrast only a small number of those remaining in employment saw their earnings fall. The NMG survey – a biannual household survey commissioned by the Bank of England to gather data on households’ finances – discovered that more than half (57%) of households, regardless of employment status, reported that they had reduced their spending in the last twelve months. This marks a perfect opportunity to reconsider financial practices for 2021. In this blog our experts look at the first sensible steps to take when budgeting for the coming year.

New year, new budget

There is no getting away from it, 2020 was a unique year, with many facing unprecedented challenges. Taking into account the furlough scheme and its effect on household income, alongside the countrywide lockdowns and their influence on spending, 2020 has been an interesting year from a budgeting perspective.

With so much else to focus on budgeting can easily be forgotten, but remember a budget will always be a lynchpin of financial health. If you don’t keep track of where your money is being spent, it doesn’t take much for spending to spiral out of control. Even if you already have a budget, it is worth reviewing it as spending is likely to need reviewing for the next six weeks of lockdown at least. With schools closed, payment for school meals and school clubs can be discounted, petrol usage will reduce drastically for all bust essential workers, however some costs such as household heating and electricity are likely to increase. These changes should all be accounted for in your budget as it may be that your savings can be supplemented.

However remember to be realistic, if you’ve taken up a hobby such as running or cycling during the pandemic and have therefore developed a new spending habit be upfront with yourself about it.

Budget transparency – debt

Be truthful about your debt. It can be very tempting to stick your head in the sand and hope debt will disappear; sadly it does not. However, there is so much help and guidance available for managing your personal credit concerns.  Our recommendation to you is this: be informed! You have already taken the first step by looking for information on our website, which is fantastic, but the more you read, the more empowered you will feel to become a shrewd saver, investor, and spender.

Set yourself a budgeting goal

Are you saving for your first home? Is a baby on the cards in the near future? Are you going to be one of the many people to add a puppy to the ranks during the Covid-19 pandemic? Whatever your plans, when working out your personal finances, your long-term goals are super important. The sooner you can start setting aside savings for these priorities, the more seamlessly it becomes part of your financial routine.

Whatever 2021 may hold, with a proper budget it can be a positive step for your finances. If you would like to speak to a member of our team about your budgeting needs you can contact one of our friendly experts here.

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