Save money: Taking control of your finances now could help you in 2019
With the end of 2018 in sight, now could be the perfect time to think about your finances in order to set yourself up for a prosperous new year. Millions of people entered 2018 in debt as families increasingly struggled to stretch their savings to pay for Christmas. This time last year, a staggering 7.9 million people, around 16 percent of Brits, said they were likely to fall behind with their finances in January, according to debt advice charity National Debtline. So how can you avoid falling into a financial pit-hole once the festive season has been and gone?
Liz Alley, divisional director of financial planning at Brewin Dolphin, has offered the following tips to help you become more financially aware.
MAKE A PLAN
One of the key points to staying on top of your finances is to get to grips with where your money is going.
By understanding what you have in the bank and what your cash is being spent on, a fuller picture of how much money you really have will become much clearer.
Ms Alley said: “Start by digging out your financial records, including: savings, investments, insurance plans, both general and life, pensions and mortgage statements.
“Understand what you have and where. This gives you a full picture of your financial situation.”
If you don’t have a budget, then you probably don’t where all your money is going
Once you have an idea of what your money is being spent on, draw up a budget to set yourself a spending limit which is affordable for your income and lifestyle.
Start by making notes of your monthly income and outgoings, advises Ms Alley, in order to see if there is potential for cash to be saved.
Ms Alley said: “If you don’t have a budget, then you probably don’t where all your money is going.
“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.”
TRY TO PAY OFF DEBTS
If you are able to do so, Ms Alley suggests trying to priorities paying off expensive credit card debts or loans.
This is because you could find yourself paying more in interest on the debt than you are earning on your savings, she explains.
Ms Alley said: “Before you think about updating your saving habits, it’s a good idea to prioritise paying down expensive debt like credit cards or loans.
“Borrowing rates may currently be low, but the Bank of England has started to raise the Base Rate and so it makes sense to repay debt now while rates are still low.”
Save money: This advice could help you manage your money
SAVE FOR SPECIFIC GOALS
If you have made yourself financially in-the-know by following the previous steps, you should have a pretty good idea of how much extra you can afford to save each month.
Now could be the time to start thinking about what you want to achieve, with financial advice differing for both short-term and long-term interests.
Ms Alley said: “If you have set them aside for a short-term goal such as paying for a holiday or home renovations, it probably makes sense to place them in a cash savings account.
“For medium or longer-term goals, like school fees/university tuition, paying off your mortgage or funding your retirement, investing in the stock markets offers the potential to earn higher returns.”
PENSION OR SAVING PLAN
Saving for your golden years is key to being able to retire in financial comfort.
Ms Alley suggests savers aim for a pension income that it two-thirds of your annual salary.
She said: “Working out what retirement income you will need can be tricky.
“Your life in retirement will be different from your working life.
“The amount that you should be saving will depend on what you have already accumulated.
“For most people, there is a limit on pension contributions of £40,000 a year, which includes contributions by your employer.
“Employer top-ups can really increase the value of your pension contributions, so it is worth checking you are making the most of any workplace generosity offered.”
SORT OUT YOUR WILL
A will enables you to look after your loved ones financially after you have passed away.
But few people know that drawing up a proper will also protects your family from a few economic burdens.
Ms Alley said: “Check that your will is up-to-date, or perhaps, you are one of millions who have not got around to drawing one up in the first place.
“Making a will is crucial for anyone wanting to protect their family from a huge headache after they die.
“If you do not draw up a proper will, you risk depriving your family of their home, increasing their inheritance tax burden and leaving parts of your estate in the wrong hands.”
The advice offered is based on opinions from Liz Alley, divisional director of financial planning at Brewin Dolphin.