There’s a reason why January is known as the leanest month. An early pay day in December, Christmas excess and taking advantage of the Boxing Day sales can leave our pockets lighter than usual as the long, dark winter month rumbles on. 

Studies have also shown that managing money as we go through January can even have an effect on our mental health. A survey by London-based banking platform, Curve, found 36% of British people are anxious about finances and spending, even believing it’s having an impact on their wellbeing.

If you’ve stared in disbelief at your bank balance after a night out at the pub in the last few weeks, you don’t have to feel guilty. “If anyone does feel like they’ve overspent, it is possible to get back on track and start keeping on top of your spending again,” says Hannah Cole, a financial adviser at advice service OpenMoney. 

Here Cole shares her advice on how you can get back in control of your spending as we enter 2022, from making a realistic budget to choosing which online banking apps can work best for you.

Speak to a Financial Conduct Authority registered financial adviser before taking financial advice, and think carefully before making any decision.

Make a realistic budget

When you start making any kind of budget, it’s important to make sure it’s realistic and you’ll actually be able to stick to it in the long term. To do this, Cole suggests “looking at your current spending and looking back at your monthly expenditure so the budget you set is achievable”.

There are three practical ways to create a realistic budget:

1. Visualise your money

“It’s always good to look at your money visually to see exactly where it’s going,” says Cole. This includes looking closely at all your direct debits – subscriptions that might have been helpful during lockdown may not be needed any more – and gathering together all your bills, receipts and statements from the last three months. 

“Everyone has different preferences for visually writing out their budget,” says Cole. “Some people prefer writing out their spending in notebooks, others might use a spreadsheet, or there’s a growing pool of online tools that can help you put a budget in place.”

2. Categorise your spending

Breaking down your budget into categories is a good way to keep it realistic. “Look into exactly how much you spent in the past in different areas,” says Cole. These might include food shopping, entertainment, travel and eating and drinking out. The categories will be personal to you.

When you start making your budget, you’ll know exactly how much you’re likely to spend in certain areas in the future.

3. Factor splurging into your budget

“Always take into account how much you would be willing to splurge,” says Cole. If you know you’re liable to make a lot of one-off purchases, factor this into you budget so you can make up for it elsewhere.

If you’ve been spending more money than usual as lockdown eases, Cole says it’s best to revisit your budget and make some adjustments. “If you’ve been splurging for the last few months, try and be stricter in other areas when looking back at your budget,” she says. “After living in the moment try to think about living for the future too.” 

Monitor your spending (even if it feels scary)

It’s easy to fall into the habit of not looking at your bank account regularly, sometimes it can even be daunting revisiting how much you’ve spent. But, monitoring your expenditure and being vigilant about where your money is going is key to taking control of your finances.

“Monitoring your money by logging into your banking app or budgeting app every day is really important,” says Cole. “If you spent over £40 on a meal, think about how much of that could have gone towards a food shop for the week.”

Cole suggests taking advantage of banking apps like Starling and Monzo. You can create accounts with these apps alongside other more traditional bank accounts. They also give you real-time notifications as you spend. “Getting an alert as soon as money has left your account is a really good way of tracking your spending and putting it into perspective throughout the day,” says Cole.

Monzo and Starling also let you set spending caps. “You can set up alerts that send you a notification when you’ve gone over budget that day,” says Cole. “It’s a good solution for keeping tabs on your spending even when you’re out and about.”

Develop new habits

Handling your money in new ways and making it part of your financial routine is a good way to avoid getting stressed about your spending. “One of my habits is shifting a portion of my money straight into a savings account as soon as I get paid,” says Cole. “As soon as your balance is reduced that can reduce your overall spending and means you’re saving at the same time.”

Squirrelling away a small portion of money into an “emergency pot” is another good financial habit to take up. “A good goal is to have at least three months’ salary saved up in your emergency fund to cover any unexpected payments,” says Cole.

Set yourself goals

Creating a financial goal you can work towards is not only a great way to start saving for the things you want, but it can also change your mindset about money. 

“The people I’ve met that are the worst at saving are the people who live for today and don’t tend to look towards their future,” says Cole. “Setting yourself a short-term or long-term goal you can save towards – whether that’s a new boiler or a new car – gives you an incentive to put your money towards something, rather than splurging it away.”

Again, apps can help you with this. Many banking apps let you set a financial goal, telling you much your monthly contributions should be and how long it will take you to achieve it.  

Use technology to your advantage

“In recent years a lot more online money tools have become available that can really help you,” says Cole. “Everyone should take advantage of it!”

Banking apps like Monzo and Starling, which you can open alongside your other accounts, are a great way to analyse your spending. The apps send you alerts when you’ve made a transaction, let you set up different saving pots and set saving goals. Each app has different advantages: Monzo gives you an overall spending review at the end of the year, while Starling has more options for withdrawing money outside the UK. Cole suggests reading up carefully on each to decide which one will work best for you.

Online budgeting tools can also help you. Unlike banking apps these let you link external accounts so you can see the entirety of your finances. “These let you link everything up including your current account, credit cards, pension pot and investments. You can even add your student loan so everything’s in one place,” says Cole. 

There are lots of different budgeting tools available online, many of which offer free services. Cole recommends Emma, Yolt, OpenMoney and Snoop. “Each one has different features,” she explains. “So it’s best to download a few and see which ones suit you best.”  

Images: Getty