Lose 5lbs (or possibly 10lbs, by the time you read this with all food and wine starting to build up in the house!), get fit (doubtful. Why break the habit of a lifetime?), eat more healthily (is this the year to try vegetarianism?), get a better work/life balance, spend less money, save more…essentially it’s a way to criticise your past self in a positive and hopeful way.
Yet of the 50% of people who set New Year’s resolutions, only a tiny 8% end up achieving them. So how can you make sure you aren’t one of the 92%!
We may not be able to drive over and escort you individually to the gym this January, and strangely, we weren’t able to sit with you over the festive period giving you a hard stare when you reached for that extra mince pie (that’s the role of your nearest and dearest). However, if you follow these 10 steps you will go a long way towards successfully achieving your 2020 FINANCIAL New Year’s resolutions.
1. Get organised
If you spend more than you earn you will never be financially secure, no matter how much you earn. If you don’t know exactly what you are spending your money on, then chances are you may be in debt or are not saving regularly.
To get a clearer picture of how much you spend in a month, try to pay for as much as you can with a debit card; that way, you will have a trail of expenditure without accruing debt on a credit card.
With a transaction record, you will be able to identify where you have spent your money and work out your fixed and discretionary monthly costs.
Look through paperwork too to see what savings accounts you have and whether they are up to date. You may find an account you had long forgotten about!
2. Set goals and review your success
Did you know that people who make New Year’s resolutions are 10 times more likely to attain their goals than people who don’t? If you write them down, then you have even more chance of success!
They say it takes about two months to form a habit, so don’t give up too early. If you have decided to change your spending habits in the new year, you can hope to reap the rewards by early March.
It may help to analyse where you have spent your money in 2019 and work out where you need to break your financial habits.
You can even download an app on your smartphone to help with budgeting. Try the Money dashboard, Bean or Moneyhub apps. There are lots out there, some are free and others carry a small charge. There’s bound to be one that works for you.
3. Review your credit card deals and manage your budget
It may be time to look for a better deal – look at bank fees and your home loan interest rate and consider increasing payments or frequency to save interest.
If you have credit card debt or personal loans, it could be time to review exactly what you are paying. They can be easy to lose track of so make reducing them a priority when you get paid.
Although interest rates are low at present, it’s unlikely that they will stay that way forever. Even so, some types of debt, such as store cards charge higher interest than others. Debt repayment represents a risk-free, tax-free return equal to the interest you will avoid.
It’s always wise to work out an affordable repayment schedule which repays your most expensive debt first. Try comparing deals at moneysupermarket.com or comparethemarket.com.
4. Take advantage of all your annual allowances
We should all be setting an affordable amount of savings aside on a regular basis. Ideally, the money should go out on the same day that you get paid; what you don’t see, you don’t miss, so to speak. Every time you get a pay increase, remember to increase the amount you are saving.
Did you know that you can save into ISAs on a monthly basis as well as with lump sums; it all helps towards making full use of your tax-free ISA allowances. Seeking capital gains tax and inheritance tax advice will also leave you more in control of your money to spend on the things you enjoy. Speak to your financial adviser to see how they can help you.
5. Make sure your insurance is up-to-date
Are you one of the 12 million Britons who doesn’t have a back-up plan if there was a financial disaster?
No-one likes paying for insurance until they need to make a claim. Always tell the truth when you apply for cover; if you don’t, you may not receive the payment you expect if you need to make a claim.
If you already have life cover, make sure you have taken out enough to protect your family’s lifestyle. This should also include critical illness protection. You should also have adequate income protection which will pay you a tax-free replacement income if you fall ill and cannot continue to work. It’s best to ask your financial adviser what you need based on your own individual circumstances.
Make sure too that your home buildings and contents cover is adequate, and that the sum assured reflects the true rebuilding and contents replacement. Save money by insuring the rebuilding cost, not the current value of the building.
We can help with all of these so just give us a call to arrange a review.
6. Review your risk profile
Where is your money invested? Does it still match your risk profile?
If you are approaching retirement, you will probably want to take fewer risks with your money. It may be prudent to reduce your exposure in certain markets, and even stocks and shares generally. Consider switching your gains into lower-risk funds. Specialist financial advice can help you strike the right balance in your portfolio.
7. Review your mortgage rate
The rates charged for mortgages†are on the up but there are still plenty of great competitive remortgage deals available, with fees such as valuations and legal fees paid.
If you haven’t reviewed your mortgage for a while, it may pay great dividends to do so now. You could save thousands of pounds!
There are some great rates available and with the election result now known and Brexit ahead, we have no way of predicting if they will stick around!
Remember, your home may be repossessed if you do not keep up repayments on your mortgage.
8. Start saving for your children’s future
There’s no time like the present to start saving for your children’s future. If say, you invested just £84 per month for 18 years, you could build a lump sum of £25,000*. That would go a long way to helping your child get a foot on the housing ladder.
You can invest a lot more than that without having to pay tax on the growth or income. For example, in the current tax year, you can save up to £4,368 into a Junior ISA or, if applicable, a Child Tax Fund.
9. Make sure your will is up-to-date
More on this and other things you need to plan for in the event of your death in our other article this month!
10. Dream a little!
Thinking about how to get your finances in tip-top condition may also help you think a little more strategically. Give yourself time to focus on your personal aims in life too.
When do you plan on retiring? Maybe you would like to buy a holiday home or retire overseas. Your long-term life goals will likely have an impact on at least some of what you do financially this year.
Good luck with your New Year’s resolutions…now go get yourself down that gym!
* Assumes a compound rate of interest of 3.25% per annum
Source: † Mortgage interest rates forecast