The acorn resolutions to make the oak tree
IN the final of the three-part New Year's financial resolutions, we're hoping you have settled into 2019, with a lack of financial hangover.
Whilst there is no clinical evidence of the third Monday in January being the saddest day of the year, the culmination of two weeks battering your body in parties, no future parties to look forward to, cold rainy weather and a load of credit card bills is hardly motivational.
We had looked at expenses and life insurance, but didn't touch on one point relating to their costs.
Check if you are getting the most from your life insurance. Most people set up their life cover and forget it. Check to see if it's still competitive, particularly if you bought it on the high street or through a bank. For example, even when dealing with an independent financial adviser, the cost of life cover at the most competitive end is still vast.
For example, a £200,000 life cover for a 45-year-old couple to protect their family would cost 22 per cent more between just number nine on the list, and number one (£36.68), and that's dealing with the most competitive companies. Over the twenty years that's nearly £2,000 in money wasted.
Use the saving to your advantage. Ask an independent financial adviser to put your details into their quote system to see how much you can save, and either move to the most competitive premium, or use the extra money to buy extra cover for your family. Using the example above if you took the 22 per cent you saved and bought extra cover for it, that's an extra £44,000 to you rather than corporate profits of an insurance company.
Make sure your mortgage protection plan is equally as competitive. A 35-year-old couple protecting their 25-year mortgage of £200,000 would expect to pay £13.48 with the most competitive company and £18.82 with company number nine. Alternatively, as above, they could use the extra £5.34 (nearly 40 per cent difference), to provide extra cover over the mortgage of nearly £80,000.
Maximise your ISA allowances. Just put a note in your diary for April to check what savings you have set aside and can leave aside and push this across into your ISA. Once that year's allowance is gone, it's gone.
Use the tax breaks and keep fit. The cycle to work scheme allows you to buy a bike and equipment up to £1,000 by sacrificing up to £1,000 of your salary, saving you the tax you would have paid, which could be as much as £400 for higher rate tax payers. Aside from the tax breaks, you are saving on the costs of public transport.
Lunch to work? The cost of a coffee or food is phenomenal over the year. Just £7 a day is over £1500 a year. Personally, I like the guarantee of the nutrition, so just overcook the night before and put into a food flask the next day.
Use a salary sacrifice for your pensions. Instead of taking home your earned money and paying it into a pension, having run it through two abrasive filters of national insurance, ask your employer to do a salary sacrifice.
You reduce your earnings by the pension contribution you want to make, then ask the employer to pay that direct to the pension. This saves the employer national insurance, and employee national insurance on the contribution. The employee benefits by national insurance savings by more than most pension funds grow by, and there is a double whammy if you can persuade the employer to pass on their employer national insurance as well - after all its neutral to them either way, and would make a huge difference to your final fund.
As with all money ideas, it's the pennies that make the pounds and is easy to have a through away attitude to smaller figures.
They are the acorns that create the discipline that creates the oak tree.
Make the savings stick and enjoy next year's family Xmas holiday free of charge.
: Peter McGahan is chief executive of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. If you have a financial question you would like answering, please call Darren McKeever on 028 6863 2692, email firstname.lastname@example.org or visit www.wwfp.net