Member Article

Top 10 tips to get your finances on track in 2016

Now that 2015 is over and we’ve all been through the excess in December, it’s that time of year again where we all set out our new year’s resolutions.

These tend to fall into two categories, lifestyle and finance. Not being the most athletic man in the world, I’ve decided to try and help provide some tips on something I know a bit more about, finances. So here are my top ten tips to get your finances in order for 2016.

Budget your money.

You would be surprised by the amount of people I meet that don’t know their outgoings each month. Make a list of your essential expenses such as direct debits, food, travel etc. Subtract this from your income and this will leave you the amount of money you can spend each month on entertainment and non-essential activities. This budget will help you be more in control of your spending and you will be less likely to over spend each month.

Pay down debt.

If you have over spent during Christmas, start to pay down the debt which has the highest interest rate first. For example, credit cards usually charge higher interest than a loan or mortgage. If you are not able to do this straight away, look to move your credit card debit onto a card that offers a 0% balance transfer. Barclays and Virgin money are currently offering 37 months 0% on balance transfers, although a fee will apply.

Make sure you have enough ’emergency money’.

This is a rainy day fund for those unexpected emergencies. It should be around 3 to 6 months outgoings. This fund will enable you to cover any unforeseen expenditure rather than paying for it on a credit card which charges interest.

Use your NISA allowance when possible.

An NISA allows you to save tax free which is always a good thing. Use cash NISAs for short-term savings and investment NISAs for longer terms savings (five years or more). You can shop around for the best cash ISA rates and speak to an Independent Financial Adviser about investment ISAs.

Avoid late payments on credit cards and other loans.

This will seriously affect your ability to get further credit in the future. Set up a direct debit with your credit card company so that it will get paid automatically and will stop your incurring additional charges and creating havoc with your credit report.

Watch the interest rates.

With the US federal government increase to interest rates recently, you can be sure the UK government will follow soon. It may be a good time to fix your mortgage rate with potential interest rate rises on the horizon. For example, Barclays offer a 2 year fixed rate of 1.95% with no fee if you have 60% loan to value on your home. Nationwide offer a 2 year fixed rate of 2.54% with no fee if you have 85% loan to value.

Make a pension contribution.

With the new rules around pension flexibility, pensions are a great tax efficient long-term savings vehicle. For each £80 that a basic rate tax payer saves, the amount invested will be £100. The sooner you save, the more you will have in retirement. For more information or pensions advice, speak to an Independent Financial Adviser.

Ensure savings and investments work hard enough for you.

When was the last time you reviewed your savings and investments? What was suitable 2 or 3 years ago may not be suitable now. Make sure your investments are still invested within your ‘risk profile’ and are performing as they should. All investments should be reviewed at least once a year.

Review all your insurance policies.

Don’t just accept the renewal price. Shop around as there are savings to be made. Even call your existing provider and ask them if that is the best quote they can offer. You would be surprised the discounts they will give. Also, look at your life assurance. Do you have enough cover or too much. You may get some savings here as well.

Make a will.

It is a well-known fact that not enough of us have a will in place. This document will help protect your loved ones, and ensure that you can pass on your estate according to your wishes. Speaking about death is a bit of a taboo, but try to make it one of your resolutions to overcome it in 2016.

Stewart Hodgson, Independent Financial Adviser at Fairstone Financial Management in Darlington.

This was posted in Bdaily's Members' News section by Hannah McGivern .