January is a great time to review your finances and make sure everything is running smoothly. With high inflation and taxes on the rise, the changes you make today could have a significant impact on the health of your finances in this year and beyond.
Here are some financial resolutions that could help you commence this year on a firm footing:
Review Saving And Spending Habits
Steep price rises mean it’s more important than ever to have a solid budgeting plan in place. Sticking to a budget can help you avoid splashing out on things you don’t really need. You might even find you have more money to put towards your savings goals.
It’s generally considered wise to have around six months’ worth of essential expenditure in an easy-access savings account. If you already have a rainy-day fund and are saving for goals that are at least five years away, you might want to consider investing in the stock market. Although the stock market can be volatile, history shows that it performs better than cash over long periods.
Look At Your Financial Goals
The new year is a good time to reconsider your financial goals – what you would like to achieve over the short, medium and long term. Your goals might have changed since you first created your financial plan, in which case you may need to adjust where you are saving your money and / or the level of investment risk in your portfolio.
A financial adviser can explain whether you are on track to achieve your goals and, if not, the changes you might wish to consider making. They can also build an investment portfolio that suits your individual needs and works hard to preserve and grow your money over the long term.
Make Sure Your Pension’s on Track
Understanding how much money you’ve saved up in pensions will help you work out whether you’re on track to achieve your retirement ambitions. An adviser can offer support by calculating the projected value of your pension at retirement and the amount of annual income this is likely to produce.
If there’s a shortfall, you might want to see if you can top up your pension. Pensions are a really tax-efficient way of saving for the future because of the tax relief you receive on personal pension contributions. A £100 pension contribution costs just £80 if you’re a basic-rate taxpayer, £60 if you’re a higher-rate taxpayer or £55 if you’re an additional-rate taxpayer.
Review Your Protection
Having the right protection is crucial to ensure you and your family’s finances hold up in the event of unexpected illness or death. Even if you already have protection, the new year is a good time to check it still reflects your circumstances. If the level of cover is too low, your loved ones could be at risk of financial hardship should the worst happen to you.
Utilise Your Tax Allowances
Many people wait until the end of the tax year to maximise their allowances, but the sooner you act, the better your chances are of realising your financial goals.
In the 2022/23 tax year, you can invest up to a maximum of £20,000 into ISAs to benefit from tax-efficient income and growth. You can withdraw money from ISAs whenever you like without paying tax, which makes ISAs a useful investment vehicle for pre-retirement goals as well as a tax-efficient source of income in retirement.
Other allowances include the capital gains tax (CGT) exemption and the dividend allowance. These allowances are due to be slashed in April 2023 and again in April 2024, so you might want to act quickly to maximise your tax-free investment gains and tax-free dividend income before the changes come into effect.
To ensure you are optimising your finances for this year and beyond, talk to one of our FCA authorised wealth managers by arranging a Discovery Call [Here]
This article is for informational purpose only. It does not constitute finacial, tax or legal advice, nor is it a recommendation to buy, sell or hold any investment. Past performance is not a guide to the future, investments rise and fall so investors could make a loss. No view is given on the present, future value or price of any investment and investors should form their own view on any proposed investment.