The start of a new year is the perfect time to review your finances. It can help you move towards your goals and feel more secure financially. Taking action to improve your financial wellbeing can support your overall wellbeing now and in the future. Here are seven resolutions you could make to have a positive impact on your finances.
1. Make a budget and keep track of your spending
Setting out a budget can seem dull, but having one that clearly sets out all your expenses and goals can help keep you on the right track. Budgeting doesn’t have to mean cutting back but can help you focus on what’s most important to you. That may mean putting money away for your child’s future or for travelling in a few years. Just as important as setting out a budget is reviewing it regularly.
2. Increase your pension contributions
If you’ve yet to retire, increasing your pension contributions can have a positive impact on your long-term wellbeing and security. You will benefit from tax relief on your pension contribution and as pension savings are usually invested, they can receive an additional boost from long-term investment returns. In some cases, your employer may also increase their contributions to your pension. Small regular payments can really add up to help you create the retirement of your dreams.
3. Boost your emergency fund
How much do you have in an emergency fund? Having savings to fall back on can provide peace of mind, and means you can still feel secure if the unexpected happens. From the boiler needing to be replaced to your income stopping, an emergency fund is there to dip into when you need it most. How much you should have in an emergency fund will depend on your financial commitments. As a general rule of thumb, it’s a good idea to have three to six months of regular expenses in an easy-access account.
4. Set up regular deposits to invest
While an emergency fund is important, once you hit your target, you should consider investing. Over the long term, cash savings can lose value in real terms as the interest earned is likely to be lower than the rate of inflation. As a result, adding regular deposits to your investment portfolio for long-term goals could help your money to go further. Before you start investing, it’s important to consider what level of investment risk is appropriate for you.
5. Set out a plan to reduce debt
If you have any form of debt, such as credit cards or a mortgage, setting out a plan to reduce this could save you money. Simply switching providers to secure a lower interest rate can reduce your outgoings. Alternatively, if you can, making overpayments can pay off the debt quicker and reduce the cost of borrowing over the long term.
6. Review your will and Power of Attorney
Writing a will and naming a Power of Attorney are often tasks that people put off because they can be difficult to think about. Without a will, your final wishes may not be carried out, and a Power of Attorney can provide security if you’re unable to make decisions. If you don’t already have these in place, making these tasks your new year resolutions can provide long-term security. Even if you have already taken these steps, reviewing your paperwork is important as your wishes may have changed.
7. Set out your long-term goals
At the start of a new year, it’s common to think about what you want to achieve in the next 12 months. However, this year thinking further ahead can help you achieve more. What do you want your life to look like in 10 years?
If you’re ready to review your finance and take steps to improve your financial wellbeing this year, please contact us. We put your goals at the centre of your financial plan to help you set out a roadmap to achieve them.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.
Richard Fyfe is a Chartered Financial Planner and a Director of Fyfe Financial.