16th December 2016 at 11:00am
The Festive and New Year break isn’t just a time to reflect, get together with friends and family, and set yourself some goals.
It’s also a great opportunity to think about the health and well-being of your savings and make some resolutions to get your finances in good shape.
Of course, resolutions are easy to make but notoriously difficult to keep, even with the best of intentions.
So what can you do to give yourself the best chance of succeeding?
1. Look back at your goals, then set some new ones
What are your goals – and do you need to make any new ones, particularly if your circumstances have changed? While setting and keeping goals can be hard, it could simply be about saving for a deposit, or a wedding, or taking time to make retirement plans.
Could it be the right time to have that talk with your financial adviser, or consider taking advice if you don’t do so already? There’s normally a charge for this. Alternatively, you can get free guidance on your pension planning at Pensionwise.
ISA limit to rise to £20,000 on 6 April 2017
2. Refresh, but keep it simple
“The Christmas break is a great time to step back and look at your finances but it’s easy to be overwhelmed, so keep it simple,” suggests Andy Dunbar, Head of Proposition Innovation, focusing on well-known, successful behavioural science techniques.
“Take one small step to improve your money, but make it count. Make it something your future self would thank you for. Start small, be specific and positive.”
Share your plans with your family, he suggests, because “we feel the social pressure if we go back on a commitment we’ve made in public”.
3. Get your affairs in order
John Brewer, who specialises in later life issues at Standard Life, adds: “For me, it’s about looking around at my family at Christmas time and keeping their needs front of mind, as well as my own.
“With the close of another year, ask yourself if there is anything you need to do, for example by ensuring your Will is up to date and your dependants are named as beneficiaries who will inherit your pension savings, as this isn’t covered by your Will.
“If you have aging parents, do you need to support them more, perhaps by setting up a Power of Attorney to help to manage their affairs?” Read more about later life needs in John Brewer’s blog.
4. Make a promise to save a bit more
It could be saving for a particular purpose or event such as weddings, children’s school fees, or a property deposit.
“If you have a pension through your employer, think about increasing your monthly contributions. Even increasing the amount you pay by just 1% of your salary can really add up over time,” suggests Andy Dunbar.
“You’ll normally benefit from tax relief which adds at least £1 to your pension for every £4 you pay in. If you’re a higher or additional rate taxpayer then there is a further 20% or 25% relief available. This doesn’t go into your pension but will reduce the tax you pay on other income.
“In addition, many employers may match your contributions up to a certain level so you could benefit even more if you’ve not already maxed this out.”
With the current ISA annual allowance rising from £15,240 to £20,000 on 6 April 2017, there’s even more scope to save tax efficiently.
5. Check your investments
Getting your long-term investments in shape is arguably just as important as your physical fitness so make sure you follow our simple plan to help get your investments on track.
Set your goals and review regularly
“First things first – be clear about what you’re investing for,” advises Jenny Holt, Head of Investment Solutions.
“Investing is generally most appropriate for medium- and long-term goals (at least five years) so if you want access to your money before that, you might want to think about saving instead.
“Another thing to think about is how much risk you feel comfortable taking with your money. If you don’t want to, or can’t take any risk with your money, then investing may not be for you right now.
“Once you’ve decided to invest for the long term, make time to regularly review your investments and check they’re still on track to meet your goals.”
Diversify your portfolio
Putting all your money in one type of investment can be risky but you can reduce that risk by spreading your money across a mix of investment types and countries.
Different investments are affected by different factors and what’s good for one investment can be bad for another.
Make regular payments
The final value of your investments will depend on how much you pay in, how your investments perform and how long you’re invested for.
Generally speaking, the more you pay in, the better your investments perform. And the longer you can keep your money invested, the more you’re likely to get back at the end.
A pension is an investment and you could get back less than you pay in. Information correct in December 2016 and tax laws may change in the future.