According to lots of statistics used to measure such things, household finances in Ireland are in a rare state of health. The Central Bank of Ireland’s Quarterly Financial Accounts had household net wealth at a record €1,147 billion in Q2 2024. The average debt-to-income ratio, meanwhile, has been below 100% since 2020 and falling, in stark contrast to the peaks of around 200% post-financial crash in 2012.
But we all know the old adage about stats saying whatever you want them to say. Out in the real world, most Irish households don’t feel like they’re rolling in record levels of wealth. Budgets continue to be squeezed by high inflation, eye-watering housing costs and stagnant wages. And while debt-to-income ratios might be low on paper, problem debt is on the rise as other costs eat into people’s capacity to service debts,
As a result, new applications for assistance from the Insolvency Service of Ireland (ISI) were up 28% year-on-year in Q1 2024, while the number of personal debt arrangements finalised were up 25% and the number of Protective Certificates issued up 46%.
With the festive season adding its own expenses, the New Year can be a particularly challenging time for many of us financially. But it is also a good opportunity to take stock, plan, and get everything in order so you can avoid falling into financial difficulties in the months ahead.
Here are five tips for kick-starting a wealthier 2025:
Keep track of what you are spending
The biggest and most immediate change you can make to managing your personal finances is keeping a close eye on your outgoings, if you don’t do so already. It’s all too easy to see your wages go into your bank account at the end of one month, and not pay any attention until the next. But what if you run out of money beforehand? Have you spent more than you have earned and ended up eating into your overdraft? If so, where did all that money go? Answering that question is fundamental to making positive decisions that will get you back on track.
Make a budget and stick to it
Monitoring your outgoings is the first step to taking back control of your finances because it lets you look at a) what is affordable to you and b) what is necessary and unnecessary in terms of expenses. That’s the gist of budgeting. You start with what you can afford. And then subtract all the essential fixed expenses like mortage/rent, energy and utility costs, debt repayments etc. Whatever is left over can then be divvied up between variable essentials like food, and whatever non-essential or luxury costs you want to add.
‘Living within your means’ might sound like a phrase beloved of killjoys and accountants. But overstretching yourself over a long period of time is what can land you in real financial hot water when you start struggling to cover essential costs. Setting out and sticking to a budget helps prevent that ever happening.
Plan in some headroom
Making a budget shouldn’t be seen as a licence to set out how you intend to spend every cent you earn, either. Clearing out the coffers every month is not a great financial strategy because life has a habit of throwing up unexpected surprises (i.e. expenses) that we didn’t plan for. Colloquially, we call this putting money aside for a rainy day. But rather than building up a back-up fund over a period of time, it more importantly means you have some headroom to absorb unplanned costs if and when they arise.
Set some financial goals
What do you want out of life? Money is not something we can live without in the modern world, but it is ultimately a means to an end, a token of transaction and exchange where what you want out of the bargain is the lifestyle you would like to lead. So whatever your priorities, whether it’s travel or entertainment, or saving up to improve your home or upgrade to a new one, it’s helpful to build these into your budget. It gives you a sense that your money is working for you. And it also helps you to maintain a longer-term view of your finances, which in turn can be helpful for sticking to whatever best-laid plans you have.
Don’t be shy about reaching out for help
Finally, arguably the most important piece of advice anyone can get about their personal finances is to a) heed the warning signs if you start to feel like you are struggling, and b) act on those signs by seeking professional advice. It’s easy to cross your fingers and hope that a sticky financial situation is only temporary and will right itself in good time. But things often don’t fix themselves. And when they don’t, any delay in taking action can mean the problems have only escalated and grown.
If you’re struggling to pay essential bills, act now. There is lots of help ready and available, and the sooner you look for it, the sooner you can get back on the right track.
Get in touch with us and we’ll put you in touch with a local personal insolvency specialist right away.
