Starting Your New Year Finances The Right Way
At the beginning of every year, we have great intentions, as financial promises are renewed. Getting our financial life in order should be a top priority for many as we enter 2021. Consider choosing on two key areas: goals related to being prepared for the unexpected this year, and those related to what you want to be different at the end of the year.
New Year’s resolutions can be ridiculously difficult to stick by. However, there are a couple ways to help make sure you start the year on the right financial footing.
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Make The Most Of Your Tax-Efficient Allowances
Time is running out if you haven’t taken full advantage of your tax-efficient allowances before the end of the tax year on 5 April. Every tax year, commencing on 6 April, you receive new Individual Savings Account (ISA) and pension allowances. These have great tax benefits that are designed to encourage you to save what you can and help you make the most of the money you put aside. Have you fully maximised your contribution levels for the current 2020/21 annual £20,000 ISA allowance, and annual £40,000 pension allowance? Can you take advantage of pension carry forward to make extra pension contributions? Are you fully using your Personal Savings Allowance for tax-free interest payments? What is your financial gifts tax allowance? Can you use your Capital Gains annual allowance to create tax-free returns?
Combining A Number Of Different Pensions
It’s quite common these days for people to have built up a number of pensions during the course of their lives. Over your career, have you worked for different employers and built up a number of different pension pots and/or pension schemes? Do you have personal pensions built up during times spent being self-employed? At some point, and not necessarily near your retirement – you’ll have to decide whether to consolidate them or leave them separate. Pension consolidation could potentially be a way to maximise the value of your investments. It can make it easier to track how well a fund is performing in making your money to work on the markets to boost your investment returns, and it gives an opportunity to minimise how much you lose paying scheme charges. However, consolidating a pension isn’t for everyone. When weighing up whether consolidating your pensions is the right move, it’s essential to obtain professional financial advice Leeds.
Check When Your Next Review Is
You’re not sure which you should prioritise – your pension, mortgage or your ISA. It’s keeping you awake at night over whether you’re saving enough for your children’s education. And you can’t quite remember whether you have accumulated 4, 5 – or was it 6? — pension pots from previous jobs. Now may be time to consider your next financial review to discuss your immediate and future plans and talk through your financial goals.
Go Over Your Budget
Review this past year’s budget. What did and didn’t work for you? If your current budgeting methods and tools are not working, look for an even better way to track your spending. Assess your income and expenses, searching for places to save money. Revise your budget to account for any changes to your income or expenses in the new year. If you do not have a budget, you really should make one. What are your priorities? How can you make this sustainable?
Take A Look At Your Investments
Whether your dream is to build a nest egg for nice and early retirement or to leave something behind for grandchildren, reviewing what they are and whether you’re on track is important. How long should you be prepared to put your money away for? Do you want to invest for income, growth, or both? Are your investments aligned with your values and life goals? How can you grow your wealth? As we enter the new year, it’s important to remember that volatility is also part of investing. But rather than looking at short-term volatility, it pays to look at the bigger picture. Your long-term goals should remain centre stage. All investments come with some level of risk, and you can decide how much risk you want to take. This should be tied to your overall financial position and investment attitude. Differing circumstances and goals could mean that what was once appropriate, no longer is. It is important that you feel happy with the level of risk you’re taking with investments. Should you review your investment portfolio? Is your portfolio sufficiently diversified? Does your portfolio reflect your goals and risk profile?
