For most of us, a New Year means a fresh beginning with resolutions.
Now's the time to start making those important decisions, especially when it's in relation to your finances.
For those so important decisions, I am recommending five suggestions for your New Years Resolutions.
1.
Set up an emergency cash fund.
Most people say, "It will never happen to me".
The importance of an emergency fund is to assist with exactly what it says on the tin, an emergency.
It could be that you have a loss of overtime or end-of-year bonus; the washing machine needs replacing; the car has just failed its MOT.
What would you class, as a financial emergency? Under normal recommendations, you should have at least 3 months worth of living expenses.
Hold this on deposit in an instant access bank/savings account.
If you're self employed the permutation should be higher to compensate for income fluctuations and seasonal changes.
2.
Get out of debt If you have unsecured loans, credit cards and/or overdraft debts, start budgeting, work as hard as you possibly can to decrease or even pay off these debts as soon as possible.
How to do it? ·Quit using your cards (easier said than done) and/or cut them up now, especially if you can't afford to pay them off at the end of each month.
·Create a financial statement so that you live within your means.
·Map out your strategy for making the extra payments.
·List all your credit cards in order of their balances from biggest to smallest along with their monthly minimum payment.
·Concentrate on paying off the smallest card first while paying the minimums on all your other cards.
·Once the smallest card is paid off, take that payment and add it to the next smallest card.
·Continue this process until all your cards are paid off.
·Replicate the same method on paying off the loans the same way.
·Paying off the smallest credit card first will do a lot for your financial stratagem.
3.
Retirement Planning If there's one thing that everyone agrees on, it's that pensions are very confusing, if you don't understand, talk to a specialist independent financial adviser.
Review your retirement planning at least annually.
The beginning of the year is the perfect time to review your premiums and rebalance the investment funds.
This is crucial as it also helps to manage the investment risk.
It's also important to understand that pension companies change investment funds and their charges from time to time.
The humble state pension, for most people is the steadfast pillar of our retirement income.
Make sure you have an up to date future forecast.
Company and personal pensions are a key vehicle for long-term savings.
While it's essential that we get to grips with pensions, we needn't overreact.
Pensions should be just one part of our overall long-term investment strategies.
Also, remember that your pension contributions are tax efficient - For every £80, you put into your Pension the Government will add £20, up to certain limits, which will help you to achieve the lifestyle you want in the future.
However, if you are a higher rate taxpayer you can benefit from even more tax relief as an extra 20% (please remember tax rules may change in the future), which can be claimed through your tax return.
4.
Set up a Financial Budget.
I know, I know, nobody likes the "B" word.
How many of you have tried budgeting and think it's a waste of time? Come on, let's see those hands.
OK, that's just about everybody.
However, a Financial Budget is a perfect way to see exactly where your money is going.
If you don't like doing this, speak to a financial adviser who specialises in cash flow forecasting (financial forecast planning).
When setting up a Financial Budget, try to keep it as simple as possible.
What you're trying to do with a budget is to prevent overspending, which ultimately leads to piling up debt.
Contrary to the way most people budget, it rarely matters what you're overspending on, dining out, entertainment, clothes, etc.
Who cares? It's still debt, right? The answer to budgeting is the "70% resolution".
It's a faster and easier way to structure your budget without having to account for every penny.
In other words, by limiting all essential spending to 70% of total income, your savings will soar.
5.
Prepare A Personal Financial Statement.
The only reason as to why a person wouldn't want to prepare a personal financial statement is that they are afraid of what they might find out.
Well, if this is you, its time to face reality.
Personal financial statements (I'm talking about a net worth statement and a cash flow statement, which is basically the same thing as a budget) are an excellent way to gauge your progress from year to year.
If you go through the year knowing that you are going to be accounting for your habits the next time you prepare your financial statements, you will do a better job of keeping your spending under control.
In addition, once you prepare a net worth statement, you will find yourself wanting to improve on it.
With every financial decision, you make, you will think about the effect every transaction will have on your net worth.
If you are struggling to put a financial statement together, speak to a financial adviser who specialises in cash flow forecasting (financial forecast planning).