Top Financial Planning Tips for 2019
If you can believe it, 2018 is almost drawing to a close. Getting to grips with your financial affairs at the start of a New Year is always a good idea, as it will not only help you save money in the coming months, you could also find that you are better placed to make money from your investments.
So here are my top tips to improve your finances in the coming year.
- Have a financial plan – Approaching your personal finances in the same way a business approaches its annual planning may seem like a strange strategy, but it really does work.
You don’t really need to create an incredibly detailed plan with profit forecasts for your household, but you should create a set of financial objectives for the coming year. Goal setting is one of our favourite motivational techniques at Addidi – once you know where you are headed, you can work out how to get there.
- Budgets – It sounds boring, I know. But if you get your budgeting right then you will have more money available to enjoy yourself, which can only be a good thing.
The biggest stress you are likely to face is having a lifestyle not matched by the amount of money you are earning. Often when we take a good look at our finances, there are always things that we pay for that could be cancelled to save money. For example, unused gym memberships, Netflix subscriptions when you rarely watch it/could share with someone else, or long-standing subscriptions to magazines you no longer read. All of these little expenditures in a month can soon add up, and you are essentially just throwing money down the drain. So, stop wasting money and start saving it, or if you really cannot do that, then at least make sure you are getting full enjoyment out of the things you spend monthly money on.
- Compare your insurance and utility bills each year and make sure you are getting a competitive quote. It may seem like a chore, but when it comes to your insurance and utility bills it really is worth checking the details each year. You can use comparison sites to help you do this, and for a small investment of time you can make big savings.
- Do not borrow unless it is for something big and important – debt has become such a way of life for many of us that we have forgotten the art of saving and waiting for something we want. In the finance advice industry we classify bad debt as when you borrow to fund an unsustainable lifestyle, such as for holidays or buying furniture you don’t really need. While good debt would be, for example, to buy a home. Stick to good debt, and otherwise save for what your heart desires. You will value it more for the wait and delayed gratification is good for the soul.
- Risk – the amount of risk you will take with investments is something so personal, it is quite difficult to talk about generically. But one thing is for sure – you should never be taking investment risks that stop you sleeping at night.
You can afford to take higher risks for longer-term savings such as pensions, because if things do not go your way then you will have enough time for markets to recover. But your short-term saving goals (such as your pot for a deposit on a new home) should not be risked.
- Insurance – home insurance is one thing, and car insurance is obligatory. But for many people that’s as far as they get when it comes to insuring their valued assets in life. Failing to insure your income, your life or your health could cost you a lot more than you expect if you become critically ill. Expand your thinking on insurance towards income protection and critical illness cover. You will be so thankful you had it if something unexpected happens, and it is likely to cost a lot less than you think.
- Write a will – Around two thirds of us do not have a will. By neglecting to make one, not only are we leaving behind a major headache for our loved ones, we are also potentially handing our worldly goods over to the Treasury which gains tens of millions of pounds each year from people dying intestate.
Writing a will does not have to be complicated (especially if your financial affairs are relatively simple), and it can save your estate a lot of money in inheritance tax if you fall into this bracket. Many people think only the very rich pay inheritance tax, but thanks to a combination of rising house prices and little movement in the IHT thresholds over the years, many people now become 40% taxpayers for the first time after they have died. It doesn’t have to be this way, so take the time to write that will.
Bear it in mind, it is certainly better to speak to a solicitor before doing so as homemade wills often cause more problems than they solve.
- Be happy – sounds obvious, right? Still, getting your finances in order is one of the best ways to relieve unnecessary stress you might be suffering from. Every problem has a solution – it might just take a little time and effort. So don’t lose heart, never bury your head in the sand, and get the help you need sooner rather than later. When you have everything as it should be, then that is the time to enjoy the fruits of your labour.