I’m sure we don’t all need to be reminded of what a strange and testing year 2020 has been, but as it draws to a close many of us will be making plans and resolutions to make 2021 a year to remember for all the right reasons.
When it comes to New Year’s resolutions, for many of us it’s a Groundhog Day and we will make the same promises we do every year (such as join a gym, reconnect with old friends, drink less) which if we’re lucky may stretch into mid-January, or the first week when it comes to one of those in particular. This year mine was to lose 10lbs, which means at the time of writing on New Year’s Eve, I’ve only got 15lbs to go…. But this New Year why not concentrate on something that will make a difference for years to come – financial resolutions!
Following Scott’s excellent recent article on Covid’s effects on your finances (which you can read here), our hierarchy of financial needs gives a great 5-step plan to take into the new year:
1) Review your debts– Pay off high-interest credit cards or loans first. Making minimum payments is a trap that could mean that one small purchase could literally take decades to repay! Clearing those with the highest rates first and moving to 0% deals will save a lot of money over the years. Don’t be too hasty to cut all of your credit cards up though, there are benefits with protection on payments, credit scoring and for use in emergencies.
2) Protect your status quo – It‘s fair to say that this year has shown us that anything can happen!! Ensure you have the right protection policies in place to keep you moving towards your life goals should you hit bad luck. Don’t fall into the trap of letting annual policies auto-renew as prices will almost certainly creep up and you’ll be paying well over the odds before you know it.
3)Build an emergency fund– Once rid of those high-interest rate debts and your protection policies are in place, it’s also important to have an emergency fund of at least 6 month’s outgoings that will be a buffer against debt in the future, or cover you in emergencies. With interest rates at historic lows, and talks they might go even lower, it’s important to review your savings and investments to make sure you are getting the best returns possible, as these compounded returns make a difference!
4) Organise and understand your pension and retirement provisions – Nowadays it’s not uncommon to have various jobs in our working lives and as a consequence,this leads to various pension pots all over the place. Some of these will almost certainly be in outdated plans with poor investments or expensive products. Get them all together to understand where you are – you may be pleasantly surprised, or it may serve as a kick up the backside to start saving more!
5) Tax-year end planning – This year seems to have flown by (quite possibly because we’ve been stuck indoors and the days merge into one), so the 5th of April will come round too in no time. Before then make sure you utilise all your annual allowances such as pensions, ISA/LISAs, capital gains tax, and gifts.
It may be very different from previous years but all of us at Strategic Solutions hope you have a wonderful New Year’s Eve and wish you health, wealth, and happiness in 2021 and beyond! As ever, if you have any questions about the above, or we can be a help in any way, please email us at hello@ssfs.co.uk
