Updated 23 January 2017
It’s time to work your dough into better shape with some money-minded New Year’s resolutions.
Ugggh, the festive hangover. It hits the purse and wallet as much as anywhere else. But don’t take it lying down – make 2015 the year in which you strive for fitter finances. Let the workout begin!
We know you have a headache. Here’s the easy bit. Sit down and plan out your life goals for the next five to ten years. See yourself moving house? Starting a family? Are your children heading for private or higher education? And what about your own hopes and dreams? ‘‘Money only becomes useful when it’s put towards a goal,’ says Paul Lindfield, Director of Sedulo Wealth Management. ‘So make sure your investments are focused on the goals that you have in mind.’
How do you make your money stretch far enough so you can save? Joss Harwood of Eldon Financial Planning Ltd has a neat tip. ‘Put the money away at the beginning of the month, not at the end when you are relying on leftovers. Treat it as you’d treat any other regular spending commitment.’ After all, if you don’t look after yourself, who will?
Raise your (credit) fitness levels
If you’re looking to borrow money to buy a house or some other big purchase, then your credit score could make a big difference to how much lenders will offer you and how much you pay them in interest. Even if you think your credit score is flawless, mistakes creep in easily and any lack of information can work against you. ‘You may have never missed a payment, but that doesn’t mean you can’t improve your chances of getting a loan at an even lower rate,’ says Matthew Harris, director of Dalbeath Financial Planning.
Build up your reserves
It’s a good idea to start an emergency fund if you don’t already have one. Not only is it good to have a cushion in case your income drops unexpectedly (such as through illness or unemployment), but it can also make you more confident about raising your risk exposure in other areas. This can open up more opportunities for higher yield investments.
The punch bag – beat down those debts
If you have outstanding loans or credit card debts, then make it your priority to knock them out. You’re paying much higher interest on those debts than you can earn in any savings account – which defeats most of the purpose of having savings. In most cases, it’s better to use those savings to clear the debts and start again with a clean slate.
Push your limits
Now you’re ready to set a new personal best. Ideally you should be aiming to save 10 per cent of your total income towards your retirement (no matter how large or small that income may be). Whether you have a personal or a workplace pension, try and pay the maximum permitted contributions if you can. Even though you can’t access this money until your retirement age, it remains the most tax-efficient form of investing there is.
Get on the track
We can’t say this too often: if you have old workplace pensions from previous employers, then keep proper track of them. The Pension Tracing Service should be able to help you find any “missing” pension entitlement. Remember, companies can fold or move address, schemes themselves can change hands, and you can easily lose any paperwork. So chase after those funds now, instead of in a panic the week before you retire.
Passing on the baton
Financial planning isn’t just about your goals – it’s about those of your dependents too. This means ensuring that your Will is up to date. This is particularly vital if you co-habit and/or have children, but are not married or in a civil partnership. Minesh Patel, Managing Director of EA Financial Solutions, warns: ‘Recent changes to intestacy rules have underlined the importance of making a Will, to ensure that your wishes above all are taken into account upon your death.’
Finally – get a personal trainer!
Or rather, find a financial adviser. It’s so much easier to get your money working harder when you have an expert to show you the ropes. Why not start with a free financial health check with one of our advisers today? www.unbiased.co.uk/free-financial-check