A new year is always an opportune time to make new financial resolutions and get back on track to meet your money goals.
Some of the most common financial goals include saving more money and making a plan to pay off credit card debt, personal finance experts say.
The end of the year is a great time to start thinking about the financial habits you want to take into 2024, says Joseph El Am, general manager at digital wealth manager StashAway Mena.
“Even if it’s just implementing one or two resolutions, having the right financial mindset can get you off to a good financial start to 2024,” he says.
“You’ll gain better financial control and reduce financial stress, contributing to your overall mental and financial well-being.”
The top three financial resolutions for Americans in 2024 are to save more money, pay down debt and spend less, according to a survey of about 3,000 adults conducted in October by financial services company Fidelity Investments.
About 66 per cent of respondents said they are considering a financial resolution for the new year.
Before deciding on the saving strategy that you would like to follow, it is worth looking at your current spending habits, says Raji Kaippallil, a UK-based money expert and founder of educational platform Finance with Raji.
“Begin by gathering statements from the past three months, covering all your credit and debit card transactions,” she recommends.
“Organise these expenses into various categories like rent, utilities, dining out, shopping and more. Conduct this review for a minimum of three months.
“Once you understand your current spending habits and set your budget, the next step is to look at the saving strategy you would like to follow.”
We asked finance experts to list their top saving strategies for 2024.
1. Create an emergency fund
An emergency fund is a pot of money that can be availed of at short notice to cover unexpected expenses, such as home or car repairs, says Chris Keeling, a chartered financial planner at The Fry Group.
The fund should cover a minimum of three to six months of living expenses and be in a separate bank account from your day-to-day spending account, he says.
As an emergency fund is a readily available pot, savers will often have to forego interest or investment growth in return for instant access, Mr Keeling adds.
Ben Bolger, a financial planner in Abu Dhabi who is also the co-founder of Squirrel Education, a digital learning platform that pioneers financial literacy solutions for children aged between five and 18, says this fund provides a financial cushion for unexpected expenses, reducing the need to rely on credit cards, loans or your dedicated savings during emergencies.
2. Budget with the 50/30/20 rule
For those unsure about structuring their budget, the 50/30/20 budgeting system is a good framework to follow, suggests Ms Kaippallil.
Allocate 50 per cent of your income to needs, covering essentials such as housing, utilities, groceries and education. Dedicate 30 per cent to wants, encompassing self-care and leisure activities.
The remaining 20 per cent should be earmarked for savings and investing.
This method can serve as a reliable starting point for structuring your budget effectively, she says.
According to Mr El Am, this approach not only helps in managing expenses “but also ensures a disciplined saving habit”.
“It’s a balanced way to handle finances, allowing for enjoyment while still prioritising financial security and debt reduction.”
Alternatively, Mr Keeling says there are many budgeting apps available that help to make it easier to view where you can cut down on spending.
These apps help you set a budget and track your spending against it. Ms Kaippallil says some of them also connect with your bank accounts, thereby erasing the need to manually input the data.
However, if you are not keen on sharing your financial information with an application, the alternative is to use spreadsheets, she says.
There are many spreadsheets available, depending on your needs, that can be purchased at a low cost on e-commerce platforms such as Etsy.
3. Pay yourself first
Treat your savings or investment contributions as a non-negotiable expense, ensuring that you allocate a portion of your income to yourself before paying for any other discretionary or non-essential items, Mr Bolger says.
As soon as your salary comes in, you make that payment to your savings account the same way you would pay any other bill, he suggests.
“Saving money can be challenging when you’re uncertain about your spending. To overcome this, allocate each dirham before you receive your salary,” he says.
“A spreadsheet can be a useful tool for this. Plan for expenses like rent, bills, car payments, discretionary spending and, most importantly, set a monthly savings goal.
“Aim to allocate your funds so that your account balance reaches close to zero. This way, you’ll spend with intention and have a clear understanding of where your money is going.”
financial planner and co-founder of Squirrel Education
4. Automate savings
To make it easier to save regularly, automate your savings by using standing instructions or direct debits, Mr Keeling says.
This will ensure you do not forget to save money each month, he says.
Set the transfer date to just after you receive an income. Once your savings have been transferred to your savings accounts, you know what is left is yours to spend, he adds.
For instance, Mr El Am says you might set up an automatic transfer of Dh500 from your current account to an investment account every month.
“Over time, you can increase the transfer amount as your salary grows or your expenses decrease. This method leverages the out-of-sight, out-of-mind principle, ensuring that a portion of your income is saved without the need for active decision-making each month,” he says.
5. Have a separate account for saving
Consider maintaining at least two additional accounts alongside your primary income account, according to Ms Kaippallil.
Set up a recurring payment from your primary account to a secondary account to pay your bills and create another recurring payment to a third account to save for your future goals, she suggests.
“To curb spending from this account, consider opening one without a debit card, making access more challenging. This will leave you with the remaining amount in your main account, which is essentially for spending,” she says.
“By segregating funds, your main account now reflects only the remaining balance, which could trick your brain to think of it as your discretionary spending rather than your total income.”
6. Set financial goals
Setting saving and investment goals will motivate you to save regularly.
It is crucial to set achievable goals when it comes to savings and investments, says Mohit Mehra, vice president of operations at digital payment app Totl.
Keep simple targets for yourself that can be broken down through the year. For example, “I want to save Dh5,000 by May 2024” and you can keep building on that, he suggests.
Mr Keeling says these could also be annual goals, or for specific purchases, such as a new car, a property purchase or even saving for your retirement.
Ensure these goals are realistic and do not put too much pressure on yourself to achieve unrealistic targets, he warns.
StashAway’s Mr El Am says “for short-term goals, you could save your cash in a low-risk, high-interest savings or cash management account”.
“But for long-term goals like saving for retirement in 20 years, investing your money in a diversified investment portfolio allows your capital to benefit from an appropriately higher level of risk and return over a longer period.”
7. Use a high-interest savings account
Using a high-interest savings account can significantly boost your savings growth, says Mr El Am.
For example, suppose you have Dh5,000 in a traditional savings account with an interest rate of 0.5 per cent annually. Over a year, you would earn about Dh25 in interest, he says.
However, if you transfer this amount to a high-interest savings account or a money-market fund offering 4.5 per cent annually, your interest earnings would jump to Dh225 a year, he adds.
This fourfold increase in earnings can make a substantial difference over time, especially as you continue to add to your savings.
8. Remember to shop around
Ensure you shop around and compare prices for the savings accounts that best suit your requirements, Mr Keeling says.
“Banks will have different offers when it comes to savings options, and it pays to research the market for the best option for you. Ensure you are comfortable with any investment risks that you are taking,” he says.
Mr Bolger says by actively seeking discounts, promotions and loyalty programmes, we can save money on both our everyday and occasional expenses.
The more we reduce our spending by shopping around, the more we will have available for savings, he adds.
9. Use cashback, reward apps and e-vouchers
Cashback and rewards apps offer incentives for everyday purchases such as groceries, restaurants and movies where customers gain store credit, cashback, freebies and more, says Mr Mehra from Totl.
Look for apps that offer the highest value back, especially at places you regularly visit, he says.
“E-vouchers are another great way to maximise savings. Buying e-vouchers in bulk can be advantageous, primarily when bought for brands you frequently spend on,” he says.
“Look for e-vouchers that can be partially redeemed, especially when your spending involves informed purchases like bulk buying for home utilities.”
10. Envelope budgeting
Envelope budgeting has been around for a long time but went viral recently due to its effectiveness in being able to save money, Ms Kaippallil points out.
It is a budgeting strategy that involves physically separating your income into designated envelopes, each representing a specific expense category, she says.
“The physical separation of cash into different envelopes is one of the reasons why many find it easier to adhere to,” she says.
“Unconsciously, you now know the budget for each of your expenses and have a clear visual representation of the money remaining.”
