This is the perfect time of the year to make resolutions.
During such tough economic times, it is understandable that so many people stick their heads in the sand when it comes to their money.
By considering a few simple personal finance resolutions, it is possible to transform your personal finances and get to the end of 2010 with a much healthier financial position.
Here are our eight top personal finance resolutions for 2010.
1 – Work out your budget
It continues to amaze me how many people simply don’t know how much money they spend each month (and where this money goes). Working out and sticking to a monthly budget is all about spending less than you earn. If you achieve this, month on month, you will be in a better financial position at the end of 2010 than you were at the start.
2 – Get out of the red
If you have short term debt (credit cards, store cards, overdrafts, etc) you will know that debt is a drag on your ability to meet other financial objectives. It’s also an emotional drag on your attitude towards money and personal finances. Make clearing your short-term debt a priority before starting to save for other financial plans.
3 – Make a plan
This action ties in closely with your monthly budgeting. When you are working out what you are going to spend your money on each month ensure that you prioritise debt over savings. Stop taking on more short-term debt. Mark a debt-freedom day on your calendar and stick to it.
4 – Look to the future
Starting a pension is likely to be a big priority for many people in 2010. We recently heard proposals from the main political parties on the subject of pensions, all suggesting we will need to save more and work for longer. You cannot rely on the State for a sustainable level of income in retirement and that means you need to use a pension or another investment vehicle to create your own sources of income for later life.
5 – Pay less tax
No one enjoys paying tax but many of us fail to take the simple steps that enable us to pay less tax. Each and every year we waste an average of £132 per taxpayer because we don’t take some simple planning steps and maximise our tax allowances.
The simple steps you can take to pay less tax include making sure savings and investments producing taxable income are held in the name of the lowest earning spouse and using your annual Individual Savings Account (ISA) allowance. From 6th April 2010 we can each invest up to £10,200 each year into a tax-efficient ISA.
6 – Review your mortgage
The ‘credit crunch’ has made getting good mortgage deals more challenging, yet it remains important to review your mortgage regularly to ensure you are paying a competitive rate of interest. If you are on your lender’s standard variable rate (SVR) then you might be able to access a better product, saving you money each month which can go towards your other financial objectives.
7 – Sort out your financial affairs
If you don’t have a Will, get one. You can write your own Will but there are some major risks involved with this DIY approach, so meet with a solicitor to get this organised. If you die without a Will, your estate will be distributed according to laws created in 1925. It is no surprise that these laws probably do not reflect modern thinking on inheritance! Don’t risk dying ‘Intestate’.
At the same time give some thought to family financial protection, particularly what would happen to your family from a financial perspective if you were to die, lose your income or contract a critical illness such as cancer. It is possible to insure against these risks but you need to quantify them first. If you have existing life assurance plans, review them to make sure they remain competitive and appropriately structured.
8 – Meet with an Independent Financial Adviser
Make 2010 the year that you carry out a comprehensive review of your personal finances and Financial Planning with an impartial professional who has access to the tools and knowledge needed to improve your current and future position. Most IFA’s offer a free initial consultation with no obligation so they can identify areas that they can help you with and you can grill them about their qualifications, experiences and charges.
