Lose 5lbs (that’ll be 7lbs still to go then), get fit (that six pack is there somewhere), eat more healthily (goji berries here we come), get a better work/life balance, spend less money, save more…sound familiar?
Of the 50% of people who set New Year’s resolutions, only a tiny 8% end up achieving them. Don’t be one of the 92%!
Follow these 10 steps and you will go a long way towards successfully achieving your 2018 New Year’s resolutions…at least your financial ones anyway.
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 2017 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 Mint Budgeting app, PocketGuard Budget app, You Need a Budget app or GoodBudget app.
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 abnormally 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.
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 and 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.
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!
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 £4,128 into a Junior ISA or, if applicable, a Child Tax Fund.
9. Make sure your will is up-to-date
Did you know that two thirds of adults don’t have a will? Most people don’t realise that if you die without having made a will, different rules will be applied to your estate – rules of intestacy.
If you do already have a will, make sure you regularly review it, especially if/when your circumstances change. It may be possible to reduce a potential inheritance tax bill by taking advice in advance and making sure that your will is valid.
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. It’s likely that your long-term life goals will have an impact on at least some of what you do financially this year.
Good luck with your New Year’s resolutions…now go and enjoy those goji berries and that glass of water!
* Assumes a compound rate of interest of 3.25% per annum