The great thing about a new year is that it gives you a fresh start to do things a little differently – including how you manage your finances.
If it feels like a mammoth task to review your finances for the coming year, we’ve got seven tips to help you make a great start.
Go through your bank statements for 2021 and create a list of direct debits and standing orders. This allows you to calculate how much you need for paying essential bills such as mortgage, utilities and council tax etc., and will provide a good baseline for planning your finances for the year to come.
Tracking your monthly spending will almost always save you money. Understanding what you’re spending is the foundation you’re going to build your financial future on.
Setting aside some extra money each month for emergencies makes good financial planning. We usually recommend between 3-6 months of your current income should be set aside in an account that you can easily get access to for those unforeseen things that you may have to pay for.
Once you have calculated your monthly living costs, you may want to increase the amount you contribute to your pension each month.
If you make additional payments to your workplace pension, it may be the case that your employer will increase or match their contributions.
If you come into extra money from a work bonus or inheritance you could consider investing some or all of this into your pension pot to help you achieve a better lifestyle for when you retire.
The standard Personal Allowance is £12,500 per annum. This is the amount of income you do not have to pay tax on and it reduces by £1 for every £2 of income over £100,000.
If you have a loan or credit card, see if there are ways to reduce this by paying off a lump sum or increasing your monthly repayments. Having a plan to tackle your debt as quickly as possible can help ease your mind as you head into the new year.
You should already be reviewing your home, car and other insurance policies you have on their renewal date using comparison sites to make sure you are on the best deal.
However, Life Insurance policies tend to last for around 20-30 years so it may not be something you think about reviewing on an annual basis. It’s advisable to review your life insurance coverage on a regular basis, in the same way that you would with your other policies. If you have had a life changing event such as getting married, having children, changing jobs, retirement or moved house then it is essential to review your life insurance policy in line with your change in lifestyle.
Many young people put off writing a will until they get older or have children. However, they are essential to help avoid any disputes in the event of your death between your family and will ensure that your money goes to the people you want.
Once you have actioned all the above, it’s a good idea to discuss your next steps with a financial adviser and ensure you are investing and saving money aligned with your goals and in the most tax efficient way.
Contact us today to schedule an appointment with a Rhodes Wealth Management Financial Adviser.
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.
*Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place. Will are not regulated by the Financial Conduct Authority.