The start of a new year is a great time for reflection, in particular when it comes to your finances, and planning to best achieve your goals in the forthcoming year.
Following these 5 simple steps, should help you prepare to have your finances in order.
Prioritise around your clearly defined financial goal
First step is to set a clear financial goal; this should avoid being vague and should not be unachievable. Such actionable goals could be “to have increased my savings and use the full ISA allowance for the year”, or “to have cleared my credit card down to zero”.
Be sure to prioritize your approach to achieve your goals, so in this case you could set a weekly target of saving and/or to make a list of your debts to pay off first, interest rates against the debt could help you plan which to tackle first. In setting a goal, such as to make a 10% annual return on savings, there would be no point in having a credit card charging 15% per month on debt, as this would diminish the achievement.
Use your tax-free allowances
Whether you are investing in your own SIPP, or in an ISA, make sure to maximise the tax-free allowances that you are entitled to, for example, you can save £4,000 per year tax free into an ISA account. In terms of try to reduce the tax you are paying, such as for a higher rate tax payer, consider how by paying more into your pension, you can offset some of the tax you are charged.
Set your own personal “tax” on your salary each month
Automatic savings plans are an ideal way to get started. Consider this concept – if the government increased your tax rate, you would naturally pay it. So, by setting your own ‘tax rate’ you could automatically save a set amount monthly by transferring into a savings account, to help reach a savings goal.
Out with the old and do what you love
Make sure to close previous old and unused bank accounts and credit cards as these can impact your credit score rating and access to finance. Then focus on doing what you love, finding a way to turn your passions and hobbies into a profit.
Learn and give back
By committing the time to read financial content, you can support your learning, and explore new investment approaches and business metrics. Even if you could only manage 1 hour per week, perhaps a train journey or some breakfast reading, you could to start to review your financial library with a view to help build a portfolio of diversified investments for the future, or maybe retirement. Once your savings and investments are underway, or at a level which you feel comfortable, then you could give back to a designated charity, making the investments and resources even more meaningful by helping others.
If you would like to find out more about any of the savings opportunities or you would like help setting your 5 goals, please get in touch after all we are here to help.