New Year - new goals?
Well here we are, at that time of year where we take time to take stock and see if we need to make any changes.
New Year’s resolutions are usually well intentioned, but many are broken before the end of January and some may even be broken by the time you’ve read this article!
The usual suspects; losing weight, getting fit, stopping smoking etc., top the list, but do financial New Year’s resolutions ever come into the equation?
Here are a few points which may help.
- Write down your financial goals. You wouldn’t start a journey without working out how to reach your destination. Financial planning needs to be treated in the same vein. You also need to sort out what are your short term goals and long term aspirations. The key is to prioritise and allocate sufficient funds to each area, committing to regular reviews to make sure that your targets are on track. It is widely acknowledged that written objectives are much more likely to be achieved than those that aren’t.
- Create a budget to work within. Plan a budget for the year which includes any additional expenditure on birthdays, holidays etc. Make sure you also try to save a percentage of take home pay to provide for any unexpected costs that may arise.
- Learn from the past. Review last year and take a look at where your hard earned money was spent. How much did you use to repay debt? Seeing where your money went will provide you with a platform for the New Year, while also learning from any possible financial errors you made.
- Review debt levels. Bank of England Base Rate has been held at 0.5% since March 2009. At some point in the future this will probably increase, which means a turn for the worse for borrowers. Have you reviewed your mortgage, loans or credit cards? Are you tied into any deals, or are there any penalties for moving?
- Review your current account. Most of us stay with our current bank because it’s too much hassle to change. That doesn’t have to be the case and if you feel that your current bank isn’t offering good value, then switch – the new bank will usually take care of transferring all your standing orders and direct debits, etc. There’s even a new bank charter covering this.
- Review your pension arrangements. Pensions come in all shapes and sizes, so it is important to ensure that yours is a good fit. If you’ve had your pension for a number of years you could be paying high charges with little flexibility. Newer arrangements, including stakeholder pensions, might be able to offer a wider range of investment options than your current plan, often at a lower cost. Before making any alterations to an existing plan make sure this will not affect any guarantees that it may have. Auto Enrolment will play a big part in pension planning in the coming years, affecting both employers and employees, so talk to an independent financial adviser to see how this affects you.
- Review your savings and investments. With interest rates so low, finding a good home for your money has become more difficult than ever. The best savings rates are usually reserved for internet based accounts and whilst a lot of savers are wary of the internet, it really may be worth overcoming that fear to find the better rates. If the internet is definitely not for you then consider telephone or postal accounts, as these often offer better rates than the high street. Talk to your financial adviser about your investment portfolio to make sure that the mix of investments matches your attitude to risk and the funds within the portfolio continue to meet your investment objectives.
Getting the right help with your financial New Year resolutions should, hopefully, make sure that they last beyond the end of January and put you on the path to financial fitness.
Armstrong Watson, as an independent financial advisory firm, has been providing bespoke investment solutions for clients for many years, so if you feel that you need advice and would like to review your arrangements please contact Phil Jackson, Financial Planning Consultant.
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