7 new year financial resolutions to get your finances in good shape for 2022

Category: News & United Kingdom

The end of a calendar year is the natural time to both look back at the previous 12 months, but also to look ahead at what the future might hold.

The last year has proved challenging but, despite the shadow of Omicron, there are clear signs of light at the end of the pandemic tunnel.

The start of a new year is also the time when we make resolutions about things we plan or hope to do in the coming months.

Given the financial upheaval caused by the pandemic, you might want to consider some of your resolutions having a monetary element. So, here are seven new year financial resolutions for you to consider.

1. Take control of your finances in 2022

For most people, the week between Christmas and the new year forms a natural and welcome break from work. With a limit to the number of mince pies you can eat and the number of times you can re-watch The Great Escape, it’s an ideal time to sort out your financial records.

Start by setting up a simple spreadsheet that shows all your regular monthly outgoings, alongside your monthly household salary, plus any income you get from other sources.

This will give you a handy overview of your financial position. It’ll tell you:

  • How much disposable income you have each month
  • If you need to reduce your monthly outgoings
  • If there’s scope for you to save or invest more.

2. Check your regular outgoings

Once you’ve listed your income and regular outgoings, the next step is to review those outgoings to see if you can make any savings.

Check through all your direct debits to see if there are any that you can cancel or reduce. In both cases, you may find payments have been over-collected in error and you can start your new year off by claiming a handy refund!

Checking your bank statements regularly – maybe once a month – is a good habit to get into, so now would be an ideal time for you to start doing that if you don’t already.

3. Can you pay any more into your pension or super?

Saving for your retirement should always be a high priority when it comes to prioritising your discretionary spending.

Once you have a clear idea of your income and outgoings, you’ll be able to identify if you have a surplus that will give you scope to set aside more into your pension.

In the UK, you can contribute 100% of your earnings or £40,000 gross – whichever is lower – each year. The UK government offer a valuable tax incentive, so for every £80 you contribute, they’ll add £20 tax relief as a basic-rate taxpayer. Tax relief is even more generous for higher- and additional-rate taxpayers.

In Australia, all super contributions are taxed, but you can pay up to $27,500 each year into your fund – including employer contributions – at the concessional tax rate of 15%.

The power of compounding means that the sooner you add contributions the harder they can start working for you. If you’re in any doubt about where to allocate surplus money, your pension arrangement is often the best place.

4. Sort out your old super and pensions

As well as maximising contributions to your existing pension and super arrangements, make 2022 the year you take control of all your retirement planning. The first step is to find out exactly what pensions you have and what they’re worth.

It’s been estimated that the average person will have 11 jobs in the UK and 12 in Australia. That could mean numerous pension arrangements, and it’s likely you may well have lost track of some of your pensions.

If you think you do have funds you’ve lost track of, there are ways of finding them.

Tracing pensions in the UK

If you need help, the UK government’s free Pension Tracing Service can provide useful guidance.

Tracing super arrangements In Australia

We wrote an article recently about tracing your old super funds. This contains details of websites that can help you find funds you’ve lost track of.

Once you’ve traced all your funds, you should write to all the administrators and ask for an up-to-date valuation. This will give you a clear picture of the value of your pension fund and what it might be when you retire.

5. Set up an ICE document

As part of your new year tidy up of your financial records, you should set up an “In Case of Emergency” (ICE) document.

This is an easily accessible folder, or file on your computer, which gives all the key information about your finances. The idea is that, if anything should happen to you, your family will be able to easily access all the important information they need to take control of the family financial affairs.

The sort of information your ICE document should contain includes:

  • Contact details for your accountant, solicitor, and financial planner
  • Information about where your important documents are held
  • Policy numbers of your insurance documents.

Resolve to put all the important information into one document to make it easy for your family to deal with your affairs if something were to happen to you.

6. Pay off your high-interest debt

If you spend time worrying about the amount of credit and store card debt you have, then making firm plans at the start of the year to clear your debt will give you a big boost as you go into 2022.

Credit cards charge eye-watering levels of interest, and the negative power of compounding means that the debt will grow quickly to the point of being out of control if it isn’t managed.

Target your cards one by one. Focus on clearing the one with the highest interest rate first as quickly as possible. Then on to the next, and so on.

When they are all cleared, you’ll find you have more disposable income each month. Effectively, you’ll have given yourself a pay rise!

7. Make sure you have a will, or wills, in place

Dying intestate means the courts will decide how your assets are distributed when you die. This means that your loved ones will have little or no say in the matter.

By making a will, you can ensure that your wealth is passed to who you want it to go to. You also have the comfort of knowing that you’ll have given your loved ones one less thing to have to worry about at an emotional time when they are liable to be very stressed and upset.

If you have assets in both Australia and the UK, you should set up a will for both jurisdictions covering the assets in each.

If you haven’t already done so, make 2022 the year when you get will set up.

Get in touch

At bdhSterling, we have a wealth of experience in helping clients with their financial planning.

Get in touch to find out how we can help you.