Your financial New Year: looking back and looking forward
HAPPY New Year to you all. The Roman God Janus ushered in new beginnings whilst placing past endings firmly behind. Good financial plan.
So as 2018 arrives, here are a few potential financial new year's resolutions I've used in the past for you to consider. Pick three at best and nail them:
:: Always have a holiday booked, putting yourself first, as that will keep you focused when the hurdles arrive during the year. It will also give you a chance to buy your foreign currency at any weakness during the year. This will give you a starting point of that nice feeling of control rather than the stress feeling of always being reactive (booking a holiday to help you get by).
:: Spring clean your financial products to make sure they are still fit for purpose. For example, some older pensions have a death benefit that is just a return of your premiums, as opposed to your current value of the pension. One case I saw recently had nearly a £100,000 difference. Ask an adviser to check if you are overpaying on charges. Many ISAs/investment bonds have hidden charges that are washed into the product and are opaque.
:: Is your life insurance still in place or up to date? If it is, check to see if you are overpaying as some companies have lowered their rates which could mean a higher security to your family should the unexpected occur. If you have a life insurance policy, consider writing it into trust so the proceeds go direct to your loved ones speedily and without tax as opposed to hovering in your estate, or worse, paying 40 per cent tax.
:: Make a will, or update it to include matters such as who will look after the children.
:: Expenditure - these are part of my leaky buckets. The holes in finances are so big in the bucket, you are working harder and harder to fill it. Fix the lowest and biggest holes first and then start filling it.
If you have credit card debts, eat the toad, call them and see if the rate can be dropped. Pay off the higher interest rate ones first, and reward yourself as each debt disappears. Consider borrowing against your mortgage, which will likely be a quarter of the rate. This will reduce your payments so you can now overpay and reduce the debts quicker than credit card levels of interest rates.
Credit cards are dangerous invisible money. How easy is it to spend £1,000? Now, how difficult is it to save £1,000? Pull out your spending cash for the month, put it in a jar, and when it's gone, it's gone.
:: Consider fixing your mortgage – I've mentioned a few times earlier in the year that inflation, whilst not being driven by you, is being attended to by the Bank of England, and so interest rates, and in particular fixed rates, are on the rise. Calculate your mortgage at six seven or eight per cent. Could you pay that?
Brexit fiascos are plummeting sterling, which drives up inflation, and in turn interest rates. If you leave it too late you will be fixing going into a rising interest rate environment – not a position of strength.
Use an app such as ‘wally' to budget and keep a track of spending so you know where the leaks are. Mysupermarket's app scans prices across supermarkets so you know where the best prices are.
:: If you have had your house insurance with the same provider for a while, use a broker to re-broke. Insurers are known for enjoying your apathy. My aunt realised her Santander insurance was three times what she should have been paying for the last 10 years when she ran it by a broker.
:: Finally, have a look at the performance of your investments and pensions. Last year I pointed out the difference between the best and worst pension fund was £469,000 over the last 20 years and that was just a £100,000 fund.
:: Peter McGahan is the owner of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. Do you have a question on investments or pensions? Call Darren McKeever on 028 6863 2692, email firstname.lastname@example.org or visit www.wwfp.net.