The end of the year is the traditional time for you to consider new year resolutions for the coming 12 months.
More often than not, resolutions tend to be related to health and lifestyle issues – losing weight, improving your diet, going to the gym regularly, and so on. But personal finance-related resolutions are worth thinking about and, if you can stick to them, they’ll stand you in good stead when it comes to your financial future.
Read on to find out five suggestions for new year financial resolutions. Not all of these will apply to you, but it’s likely you’ll find at least one or two that will be worth committing to.
1. Keep your financial records up to date
Resolve to keep on top of your paperwork in the coming year and ensure everything is always up to date.
Not only does this make everything easier to find when you need to deal with financial issues in a hurry, but it also puts you in a strong position when it comes to managing your taxes and completing your annual tax return.
Having a clear idea of your financial position also helps you keep control of your money, so small problems don’t escalate into bigger – and costly – ones.
2. Aim to save and invest more of your money
With inflation and interest rates at historically high levels, these are clearly challenging financial times. Additionally, the cost-of-living crisis is forcing many people to make difficult financial decisions.
Looking to set more of your money aside each month into savings and investments is a worthy goal and can help secure your long-term financial future.
The effect of compounding means that the sooner your money is set aside, the sooner it can start working hard for you.
If you’re looking to save and invest money for a period of five years or more, then you could consider an investment strategy rather than a savings account. Historically, markets have delivered positive returns in real terms over the long term. So, investing can help you grow your wealth.
Setting up a monthly contribution will mean you buy stocks and shares at different points of the market cycle, which could help to balance risk and volatility.
3. Set yourself some clear financial goals
Having a clear idea of what you want to achieve can mean you make financial decisions that are the correct ones for your circumstances. It also means you have a goal to focus on.
Given you’re at the start of a new year, a 12-month horizon is understandable, but taking some time to consider your longer-term future can also make sense.
Decisions made now can have a big impact on your financial wellbeing a long time into the future.
As well as thinking about your finances, it’s also worth having an idea of the sort of lifestyle you’d like.
It can be much easier to save money if you’re targeting specific events, such as a series of big holidays, or stopping work early to enjoy a long and fulfilling retirement.
Doing so can help you to stay on track, as you’ll be focused on an end goal and the steps you need to take to achieve it.
4. Look to get the best rate on your savings
The positive take when it comes to rising interest rates is that you should be able to get a decent return on your savings – even in the most straightforward instant access account.
So, when it comes to money you’re setting aside with a time frame of less than five years, it’s worth taking steps to ensure you’re getting the best possible returns on your money.
Look at what you have saved and when you might want to access different amounts of money. If you’re prepared to lock your money away for specific terms – such as two or three years – you may well be able to find fixed-rate offers that will give you a good rate of interest.
It’s also worth checking the interest rate you’re currently getting on your emergency pot of money. Clearly, you need to keep it in an instant access account, but it makes sense to get the best returns you can from it.
5. Resolve to reduce your debt
Excessive debt can be debilitating and stressful. You can easily end up paying out large sums each month just to service the interest on your borrowing before you clear any of the outstanding capital amount. It’s the negative side of the compounding coin.
Not having to worry about your debt can give you great peace of mind. For that reason, it makes sense to resolve to reduce your outstanding debt as much as possible in the coming year.
It’s important to stress that we’re focusing on unsecured debt rather than your mortgage. Mortgage interest rates tend to be much lower than those charged on credit card debt, and you’re buying a tangible and valuable asset, rather than repaying money you’ve already borrowed for other uses.
So, list all your unsecured debts and put a plan in place to clear them as quickly as possible. It can make sense for you to focus on the highest interest rate debt first to clear it as soon as you can. Then move to the next lowest rate, and so on.
Nil-rate credit card transfer offers can be effective, but you should aim to treat it like a fixed-term loan and look to clear it during the nil-rate period.
Get in touch
If you have any queries regarding your financial planning or any of the resolutions you’ve read about in this article, please get in touch with us.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC legislation, which is subject to change.