FIVE NEW YEAR’S RESOLUTIONS FOR IMPROVING YOUR FINANCIAL WELLBEING
Sally Thompson MSc FPFS
Director of Thompson Financial Ltd, Senior Partner Practice of St. James's Place Wealth Management
At a glance:
A new year marks a new beginning and a clean slate. When the nights are long and the days are short, it’s the ideal time to set goals for the year ahead – including for your finances. But don’t worry if you can’t turn things around overnight. Harriet Shepherd, Financial Wellbeing Manager at?St. James's?Place, comments: “Start with the most urgent, or an easy one to tick off before the rest, and get going.”
Here are five resolutions she suggests to help set you on the right path to achieving your goals.
1. Check your financial health
First, back to basics. Why not simply tot up all your assets? It’s surprising how reassuring this can be.
Do you have a lot of cash sitting in the bank, depreciating in real value because of inflation? It could be time to consider taking the plunge and move some of this to the stock market.
People’s greatest regrets are rarely things done, but complex things left undone because they were simply too fearful, such as stock-market investing.
But do keep some ready money for emergencies – at least six months’ salary is sensible, or for older people without a fixed income, up to two years’ essential expenditure may be prudent.
2. Downsize debt
Living beyond your means is easy to fall into – most of us have been there at some point.
Be careful to recognise it when it happens to ensure you don’t end up in a debt trap. If you have concerns, start making plans today to get yourself into a more positive position.
First, go through your inbox for any emails you may have had about unpaid bills. Even the best of us can neglect the odd demand.
Don’t forget any letters lying around the kitchen table. If your finances are healthier and there are no penalties for doing so, consider paying down your mortgage – it’s surprising how much you save in interest by paying off an extra ￡100 a month.
And if you or a member of your family is in real trouble with debt, perhaps due to the COVID-19 pandemic, speak to Citizens Advice or MoneyHelper, both government-backed organisations.
3. Use or lose your tax allowances
Ensure you make the best use of any tax reliefs and allowances you have – remember, it’s nearly always a case of ‘use it or lose it’.
This applies to the annual ISA allowance, for example. You can invest in cash, shares or funds and any growth is free of income tax and capital gains tax.
You can also use tax-free allowances if you have capital gains or want to make gifts to your loved ones – and don’t forget, if you have a spouse, they also have allowances that they can take advantage of, too.
Since tax rules are ever-changing and often complex, there is value in seeking advice.
If you’re not a member of your company pension scheme, join it. By law, your employer must contribute 3% of your relevant earnings to a pension plan, and if you pay in more, they may pay extra too.
领英推荐
This is an essential part of your rewards package and the contribution is yours for the taking – you’ve earned it!
If you already have a pension, could you put more into it this year? Are you comfortable with where your money is invested? Does it align with your values and risk appetite? Take advice to help you consider these questions, or if you’re near the tax limits.
5. Make a Will and Power of Attorney*
While it may not be the easiest thing to consider, it’s important to decide what will happen to your assets after your death.
The rules of intestacy mean that they may not go to your loved ones if you haven’t made a Will, so write one and review it whenever circumstances change. This not only ensures your wishes will be followed, but makes it much easier for grieving relatives to deal with your estate.
A Power of Attorney is essential, too. There are two types of Lasting Power of Attorney: health and welfare, and property and financial affairs.
It could be described as a type of living Will so your family or friends can look after you and your finances if the worst happens. Without a Power of Attorney, a single person with no family who suffers a severe mental impairment such as dementia could find themselves in legal limbo for a significant amount of time.
How we can help – from protection to pensions
Thankfully, for most people, the end of life is far away – your medium-term goals are probably far more exciting and fun – a new home, possibly children, a better-paid job.
Plan now if you want to get on the property ladder. Have you thought about the children’s school and university fees? What if you were to lose your job? Have you put a plan in place?
Just as your health needs a regular MOT, so do your finances, says Shepherd. “A long-term relationship with one of our financial advisers can help you make the best use of all the generous tax allowances, put new plans in place or review them,” she says.
“Our purpose is to help you become more in control of your finances, confident in the decisions you make, and to give you that much-needed peace of mind. We are focused on your financial wellbeing.”
For help in putting together or reviewing a financial plan for this year and beyond,?Contact me if you have any questions - or message me on LinkedIn
The value of an investment with?St. James's?Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. An investment in equities does not provide the security of capital associated with a deposit account with a bank or building society.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
*Please note that Will writing and Powers of Attorney involve the referral to a service which is separate and distinct to those offered by?St. James's?Place and they are not regulated by the Financial Conduct Authority.
Cash ISAs are not available through?St. James's?Place.