The new year is just around the corner and after a horrific 2023 dealing with rising interest rates and soaring grocery and power bills, many households are well and truly feeling financial pain.

But your budget is one thing you don’t want to throw in the too-hard basket in the early days of 2024, with the possibility of further cost-of-living headaches on the horizon in coming months.

So if your outgoings have grown to exceed your incomings over the past year, now is the time to take control, financial adviser and Sort Your Money founder David Rankin says.

“You can only change your finances for the better if you truly understand how they are right now,” he said.

“And getting this understanding is impossible if they are currently ‘all over the shop’.”

Let’s go through the steps to get your financial house in order for 2024.

One tell-tale sign that your finances have become unwieldy is a cacophony of different debit accounts and credit cards that are all tied to their own different recurring expenses.

Rankin says the best starting point is to consolidate all of these accounts into one place, which will require tracking down all your accounts and working out what expenses might be on each.

“This can be a time-consuming exercise, but it’s worth every minute, as tidy finances are the basics of a successful budget,” he said.

Review and cut

Now that you’ve got a better idea of where all your accounts are and what your financial position is, you can start going through the process of reviewing your expenses and making the tough calls.

The ultimate goal with any budget is to ensure your expenses don’t exceed your income, but there are many different types of expenses, from essential ones to more the more discretionary.

It goes without saying that the latter is probably where you’ll find yourself cutting back first.

In other words, Rankin says, you need to decide whether “it stays or goes”.

“If you have any streaming subscriptions that your partner is also paying for, this could be your chance to consolidate these too,” he said.

What expenses you ultimately decide to cut will be up to you and your own financial situation – the key is understanding what you’re spending on, which empowers you to take control.

This might involve thinking about which of your recurring expenses is delivering you the least value, such as a service you’re no longer using regularly or a hobby that has fallen by the wayside.

Financial adviser and On Your Own Two Feet founder Helen Baker said a good way to approach this can be to start by “cleaning up” any debts and then working out what your bill commitments will be in 2024.

Once you know that you should have a better idea what you might need to cut, and also what you might want to save for.

“You can play a game of ‘what would you rather’ – go on holidays this year, or save up for a big one [next year],” Baker said.

Streamline it

The next step to getting your New Year budget together is streamlining your accounts so you can better keep track of your outgoings.

Rankin said that a main account should be retained with an attached debit card to receive any wage payments and pay direct debit bills. Then set up another account, which will become your spending allowance for discretionary goods and services.

Rankin suggested transferring a “realistic spending allowance” from your main account to this discretionary fund at the same time each week, and then “count this amount down” from there.

The idea is that you’ll be prevented from overspending simply because your discretionary purchases are tied to the same account your income is flowing into, giving you more control.

“This is the modern equivalent of cash and is a powerful way to tame your spending and show your money who’s boss!” Rankin said.

Extra cashflow

If you’re still looking for ways to ease the burden on your budget, one option you can consider is switching to more frequent payments for essential and non-essential bills.

Rankin said that could include car registration, insurance, school fees and even utility bills.

Such payments can be moved from annual to monthly or from quarterly to monthly.

It won’t save you any money directly, but it will prevent a series of these expenses hitting your accounts all at once with devastating effect, particularly in the early days of 2024 when renewals typically occur.

Beware though, making your payments more frequent could cost you more money because paying in larger instalments less frequently often comes with discounts on the total price.

Review loyalty taxes

Baker said the new year is also a good opportunity for anyone making a budget to review the companies providing their essential services, such as energy and telecommunications.

If you’ve been with the same provider for some time then you’re likely paying a “loyalty tax” and could save money by exploring a new option.

“We tend to stick with the same insurer or electrical provider, but does it make sense?” Baker said.

“It’s twofold. One is shopping around and changing. The other is whether you can do anything smarter.

“I turn off the hot water system when I know I’m going to be out for a couple of days. There’s no point if you’re not going to use it.”