Tips for Financial Happiness in the new year.
by Julie Lord
As the end of the year approaches, your wallet might be feeling lighter than ever. Major seasonal expenses like Christmas travel and shopping create added burdens that you may not have factored into your annual spending plan.
While December can be a stressful month for budgets, it’s also the ideal time to reset your goals and create a new plan for the year ahead.
Here are our tips on how to achieve healthier personal finance goals. So before you dive into budget spreadsheets and planning, check out these tips to see if you’re missing any ideas, and how you can be successful with financial goals in the new year.
1. Start today.
The actions you take today matter. Your daily habits are the biggest contributing factor when it comes to success and wealth. Developing good savings and planning habits are the best investment you can make. The key is to START TODAY and be consistent no matter what life throws at you. Financial success is about progress, not perfection. The best time to have started may have been in the past, but the next best time is today.
2. Set measurable goals.
Any new year’s resolution that you make, and especially the financial ones, need to be achievable and measurable. Anyone can decide to save up for a holiday or new car, but once the money is spent, you are back to zero. Think carefully about how much you can save each month for the longer term and make sure you do it! As a minimum, you should think about saving 10% of your net income each month. It's measurable in that you know exactly how much it should be and it should be something you can achieve each month and not fail. Challenge yourself so that you can see some real savings growth.
3. Pay yourself first.
This is a simple concept and one which is sadly neglected. Most people will happily pay for their morning coffee, the fuel for their car, their mobile phone bill, the mortgage etc as a matter of course. But get into the habit of setting aside some money each month for the most important person – YOU! Pay something to yourself each month BEFORE you pay anything to anyone else. Use the 10% rule and save this amount for yourself – if you are not sure where to put it see Number 4.
4. Use money apps.
There are some great money apps that will help you to save money in a really simple format. We like Moneybox which allows you to save as much as you want each month into one of 3 funds and also allows you to round up your card spending thus saving almost by stealth! For example, if you spend £3.60 on a coffee, Moneybox will round it up to £4 meaning that you save 40p. If you do this on all transactions, you will be surprised how it all adds up.
5. Follow a financial plan.
If you don't have a written financial plan which includes a lifetime of projected cash-flows based on your personal lifestyle goals and dreams. get one as soon as possible. If you do have a plan, stick with the plan – you are more likely to succeed if you make yourself accountable to a written plan.
6. Look and plan beyond the short-term.
The new year is the perfect time to get your financial goals and priorities down on paper. A lot of people set short-term goals, like saving for a holiday or a wedding. But when thinking about financial plans, don’t overlook what kind of small changes you can make this year to impact your long-term goals such as retirement income. One small change that can have a big impact down the road is bumping up your contributions to your current savings and investments. Even small additions to your savings and investments can have big rewards in the long-term. Make a plan, write it down, and hold yourself accountable to it. Your future self will thank you.
7. Automate your priority payments – including savings.
Automate your priorities — such as saving for retirement, building a cash reserve, and having the right insurance—so they're paid first and you don’t have to think about them. Then wisely manage what's left over so you live within your means and always have a financial safety net to fall back on.
8. Talk about your finances.
One of the best things that you can do to help you keep your financial New Year resolutions, is to tell people about them! Don't keep them a secret. For example, if you want to start saving £x pm or start making pension contributions, find an accountability partner and ask them to keeping nagging you until you actually keep your resolutions. Let your spouse, friend, or family member know your resolutions so they can help you to keep them this year.
9. Small increases matter, especially when planning for retirement.
Now is a great time to bump up your pension contributions by 1%. Then set a reminder on your phone to do this again in 6 months. Your future self will thank you and you'll barely notice your cash flow change.
10. Ensure you have utilised all the available tax breaks.
Ensuring that you use all the available tax allowances will help you build wealth faster. Investing in tax free shelters like ISAs and pensions is much smarter then putting long term savings in the bank! Plus, the extra money the Government puts into your pension to encourage you to save, is definitely worth having and will boost your eventual retirement income.
11. Had any big life events recently?
Double check your life insurance policy. One common new year’s resolution is to get more organised—whether that’s cleaning up your home or your finances. But an often overlooked piece of that is making sure your life and health insurance is in order. Do you have the right amount of coverage? Has your marital status changed? Have you purchased a new house or had children? Has your health improved or do you have plans to lose weight and get more fit? Have insurance rates changed to allow you to get more coverage for the same premium? If so, you should have a policy review to make sure that you have life cover, critical illness and income protection cover that is still right for your life.
If any of these tips resonate with you, please do get in touch and let us help you to make this year a great financial and happiness success.
Julie Lord is CEO of Magenta Financial Planning and is always happy to provide basic financial information to help people to get a better handle on their finances and the possible solutions available to them to improve their future security and happiness.
t: 01656 760670
w: www.magentafp.com
Magenta Financial Planning is Authorised and Regulated by the Financial Conduct Authority.