Make your finances 2019-proof

It’s fair to say there were a lot of surprises in 2018 and with Brexit looming in 2019, few would dare to predict what happens next.

It could be the fallout from Brexit, the possibility of a no-deal Brexit, or even the wider global economy falling into another crash. No one knows what might be coming in this most eventful of years for the UK and the world, but no one should doubt it as the potential to seriously affect their finances.

So, if you have time off this Christmas, it makes sense to spend some of that time getting your finances ready for the year ahead. That’s true whether you have investments, savings or debt; everyone could do with building some security into their finances ahead of a tumultuous year.

Here’s how…

Plan your budget

If costs rise for any reason in 2019 then your budget will need to absorb those extra costs. And the best way to see where you can cut back or which spending is unavoidable, is to draw up a proper budget.

You’ll be better placed to ride out any bumps in the road if you know exactly how much give your finances have.

Liz Alley, divisional director of financial planning at Brewin Dolphin, says: “If you don’t have a budget, then you probably don’t know where all your money is going. 

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“This is a great financial habit to gain control of your finances. Draw up a budget showing your monthly income and outgoings. 

“Start with essential expenses that must be paid for and absolutely cannot be given up such as rent or mortgage payments, utility bills, council tax and basic food bills. Then consider where else your income goes each month and whether you could be spending your money more effectively.”

Pay down debt

It’s very likely lots of us will come out of Christmas with some debt; analysis from MoneySuperMarket shows that the average person in Britain is going into 2019 with £740 of credit card debt.

With a lot of uncertainty on the horizon, paying down as much debt as possible in the first three months of the year will mean you’re in a much better position to handle whatever lies ahead.

Watch your credit score

There are many places online where you can check your credit score for free and this is a really good idea, particularly in 2019.

It’s not just about understanding whether or not you’d qualify for a loan or credit card, checking your credit score is also like a financial health check-in. Jacqueline Dewey from credit score provider says: “When you check your credit score you get a snapshot of all your outstanding credit including mobile phone bills, credit cards, loans and mortgages. This will show you how much you owe and where any potential problems might arise.”

Regularly checking your credit file can also help alert you to certain fraudulent activity being carried out in your name, as applications for credit would be shown up on your file. With all the potential surprises coming down the road, it’s a good idea to protect yourself from any nasty surprises.

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Plan your investments

The markets hate uncertainty and 2018 saw some alarming troughs as the Brexit process lurched its way through the final 12 months. So if you have investments then that could mean another period of uncertainty and risk.

Moira O’Neill, head of personal finance at Interactive Investor, says: “While the worst thing we can do during times of market uncertainty is panic, that doesn’t mean you can’t be proactive with your investments. Using your annual tax allowances if you are in the fortunate position to be able to do so can stand you in good stead for the long term. And make sure that you’re using your spouse’s allowances too.

“Review your investments to make sure that you’re keeping the fees down as much as possible – in volatile times, controlling costs can be comforting.

“Above all, take a long-term view. Most of us are investing for longer than we think. Even if you’re starting investing in retirement, you’re likely to have a timescale of 20 plus years.”

But there are steps you can take to minimise your risk. O’Neill says: “Nervous investors might prefer to drip feed their money into the markets on a monthly basis, which can help smooth out some of the highs and lows in the price of shares. You can also contribute money to an ISA or SIPP and take advantage of your annual allowances without having to commit the whole sum to markets immediately – you can drip feed it in over a period of time.”

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Know what’s coming

In 2019 there are known unknowns, such as what might happen to the economy after Brexit, and probably some unknown unknowns too. When you’re trying to manage your finances through a storm like that, it’s useful to know what definitely lies ahead in the next 12 months.

For example, the minimum payments for the government’s auto-enrolment pension programme rise from 5 per cent to 8 per cent of earnings. That’s the kind of percentage where you may start to notice it’s missing from your packet each month.

Some of what happens next year will have a more significant impact on people, such as the rise in state pension age. Throughout the year, the pension age is to gradually increase, until it reaches 66 by October 2018.

The Help to Buy ISA will close in November next year, with would-be savers being directed to the Lifetime ISA instead. That’s not necessarily bad news; Laura Suter, the personal finance analyst at AJ Bell, says: “The Lifetime ISA has a number of benefits, including a higher limit of £450,000 on the value of the property you can buy, a bigger potential government bonus each year of £1,000 and the ability to save lump sums rather than just monthly.

“We would hope that with the scrapping of the Help to Buy ISA next year more providers will start offering the Lifetime ISA, as so far the number has been a bit underwhelming – no doubt dampening awareness and take-up of the new ISA.”


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