By ADRIAN LOWCOCK 05/01/2010
The New Year has always been a time for looking forward to the coming year and to reflect on the changes we want (or need) to make. We give some tips on simple changes which could have a big impact on your finances in 2010.
Financial Resolution 1: Know What You Want
you should have a clear, concise financial goal for the year. It isn’t good enough to say, “I want to have my credit card paid off and more money in the bank”. Instead, you should say, “I will have the balance on my credit card paid down to £0, over £5,000 in my savings account and a fully funded ISA.”
Financial Resolution 2: Prioritise Your Debts
Not all debt is created equal. Make a list of your liabilities and organise them by the interest rate. Those with the highest rates (most likely your credit cards) should be paid off immediately. It does no good to invest money while you are paying 19%+ each year.
Financial Resolution 3: Open an Individual Savings Account (ISA)
If you haven't done so already, open an ISA. You can invest upto £7,200 (£10,200 if you are 50 by 5th April 2010) per tax year.
Financial Resolution 4: Establish a Monthly Savings Plan
Monthly Savings Plans can be set up for your ISA or investments in Unit Trusts and allows you to save small amounts on a regular basis. At the same time, you will benefit from Pound Cost Averaging, where when prices are high, your monthly contribution will buy fewer units and when prices are low your investment buys more units.
The continuous drip-feed method of purchasing your investment means that the average purchase price paid over any given period is going to be lower than the arithmetical average of the market price. It also instills a useful discipline in the investor, creating the saving habit, it is also a strategy that does benefit from volatile markets.
Financial Resolution 5: Set up a Pension
Pensions are long term saving and investment vehicles which provide an income during retirement.
Any contributions are tax deductable against income tax. If you are a basic rate tax payer the pension company will claim back any tax due. For higher rate tax payers, the rest can be claimed back by self assessment. One important factor to consider is that any contributions made into a pension are locked in until retirement.
Bestinvest are able to offer access to both Stakeholders and Self Invested Personal Pensions (SIPPs).
SIPPs offer the widest choice of investments and if you have existing plans it may well be beneficial to consolidate all your investments under one plan.
Financial Resolution 6: Review your Mortgage Arrangements
Check when your mortgage is up for renewal. In the current climate your present lender may no longer offer the most attractive rates.
If there is anything regarding this article you wish to discuss please call one of our Advisers on 020 7189 9999.