The new year is a great time to break a cycle of bad habits and set some good ones. Many of us focus our intentions on trying to follow a healthier lifestyle and forget to think about our financial health.
To help you consider what some of your new year resolutions might include this year, here’s a list of resolutions to help you improve your financial health for a prosperous 2022 and beyond.
1. Pay off your debt
If debt is holding you back from saving as much as you’d like, prioritise debt repayment.
Expensive credit card debt can play havoc with your finances and having debt hanging over you can harm your financial wellbeing.
High levels of credit card debt may prevent you from securing a mortgage, or at least mean you’ll find it difficult to benefit from more generous lending rates.
2. Define your long-term financial goals
It’s easy to focus on the present and forget to think ahead for the future. So, take some time to set some long-term financial plans.
This can be a good way to motivate you to stay on track with your financial resolutions and make certain that your money is working for you.
Long-term financial goals could focus on saving for retirement, a healthy deposit for a new home or even a holiday of a lifetime. Maybe there’s a combination of things you want to plan to achieve.
Once you’ve defined your goals, you can make solid plans for how and when you’ll reach them.
3. Prepare for the unexpected
Risk is an unavoidable part of life, especially when it comes to finances. All kinds of unexpected life events can seriously knock your bank balance. Ill-health, accidents and redundancy can all negatively affect your financial health.
Begin by making sure you have an emergency fund. It’s wise to hold enough money to last you three months of expenditure in an easy-access savings account for a rainy day.
As well as your rainy day fund, make sure you have the right protection in place. If you’re the main breadwinner, consider income protection or critical illness cover to make sure you can maintain your lifestyle if you are unable to work because of a serious illness or an accident.
Consider if you need to review any protection you already have. If your salary or earnings have changed, make sure your insurance policies are keeping pace.
4. Start investing
If you’re not already investing your hard-earned money, investing should be close to the top of your list of financial resolutions.
Investing is one of the best ways to build your wealth and secure a healthy financial future. A well-diversified investment portfolio has the potential for great returns and helps you achieve your long-term financial goals.
Investing can be complicated and there are different tax-saving vehicles you can use to give yourself added advantage, so make sure you do your research. Better still, get in touch and talk to one of our expert financial planners who will help tailor your investment strategy to your circumstances and long-term lifestyle goals.
5. Get into the savings habit
Saving money every month is a great habit to get into. If you don’t already siphon some of your income into a savings or investment account each month, now is a good time to start.
Never have money left over? Review your monthly direct debits. Check you still use all the services you’re shelling out for.
Do you still read the magazine or e-zine you signed up to five years ago? Do you still watch that TV service you subscribed to during lockdown? And what about the gym membership you’ve been paying for and not using?
Be ruthless. If you haven’t made use of it in the last three months, get rid of it and save the money instead.
Set yourself a realistic savings goal. You’re more likely to stick to your savings habit if you’re not stretching yourself too much. Even a small amount each month can soon add up.
6. Plan for your retirement
The earlier you plan for your retirement, the better off you will be.
Ideally, you’ll already be contributing to a pension but, if not, make sure you take steps to set one up and start making contributions as soon as possible.
Contributions you make also benefit from government tax relief, which can be a great way to boost your savings.
If you’re already paying into a pension, consider if you can increase the amount you save each month.
The Annual Allowance allows you to benefit from tax relief on pension contributions up to £40,000 or 100% of your earnings, whichever is lower, each tax year (6 April 2021 to 5 April 2022).
Not everyone likes the way pensions work. Some people prefer to rely on the tax advantages of ISAs (individual savings accounts) or property.
If you’re unsure about what is best for your circumstances, get in touch and we’ll help you make a retirement savings plan that’s tailored to your needs.
7. Protect your estate
With all the financial resolutions you’re making (and will stick to!), an estate plan will ensure your legacy is protected and passed on to your loved ones.
First, write your will. If you already have a will, make sure it’s up to date and reflects both your level of wealth and your wishes.
Without a will, your estate may not be distributed the way you would choose. Wills are especially important if you have children, a spouse, or dependants.
If you are wealthy or own a property or other assets with a high value, it’s wise to consider steps you can take to mitigate Inheritance Tax (IHT). You’ll currently be charged IHT on the value of your estate above £325,000, or £500,000 if you plan to leave your home to a child or grandchild.
Estate planning can be complicated and there are various routes you can take to avoid having to give away your wealth to HMRC. To make sure you’re taking the right approach to protect your legacy for future generations, get in touch.
Get in touch
If you want to get your finances in the best shape during 2022 and would like help knowing what you should focus on and how to achieve your long-term financial goals, please get in touch. Email email@example.com or call us on 01275 462 469.
Bowmore Financial Planning Ltd is authorised and regulated by the FCA.
The value of your investment 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. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
Levels and bases of, and relief from, taxation are subject to change.