A new year - a new financial start

A new year can be just the push needed to review and refresh our personal goals and to change some habits. This new year, try adding in a review of your finances too.

For some people, just thinking about their finances can seem like a huge hurdle. But, like many other things in life, the thought is often worse than the reality and the hardest part is just taking that first step.

With just a few hours’ focus, you could feel more in control and more positive about your money. Whatever your starting point, there’s always something that can be done to make improvements. So, a review once a year, and whenever your circumstances change, is recommended and January, after the excesses of December, is a great time to start.

1. Debt – if you are struggling with debt, this is the first area to focus on. Debt will be a normal part of most people’s finances at one time or another and we need to understand the difference between good and bad debt. However, if that debt becomes unmanageable, then you need to seek help to bring your finances back on track. Seek help early; problems with debt only get worse if left. Check whether you can rearrange your debt with a reputable loan provider, via workplace loans, a bank or building society. Speak to the lender to arrange a repayment plan you can afford and stick to. Contact one of these debt charities for support: Citizens Advice, National Debtline, StepChange, The Money Charity.

2. Your outgoings - look at your bank and credit card statements over the last three months. Are you happy with how you are spending your money, or are there some costs that could be stopped, rearranged, reduced or paused? Even small changes on a few items can make a big overall difference. And reducing some regular costs can create more room to pay down debt or add into savings plans too. Use a budgeting tool to help.
   
   
3. Mortgages – the single biggest cost in most people’s budgets is their rent/mortgage. So, it really pays to ensure this cost is right for you and for your budget. If you are saving for a first home, are you sure of the most suitable products, how much deposit is needed, the costs, the steps and timelines in the process? If you’re remortgaging, do you know the right time to start the process and how to find the best mortgage for you?

4. Savings and investments – savings enable you to live the lifestyle you want and to meet your key life goals. There are four key things to focus on when reviewing your savings:
   
   a) Your emergency fund – this is a savings pot to call on in a financial emergency. It should be easily accessible and should be enough to cover 3-6 months of normal monthly costs. If you dip into it, ensure you have a plan to top it back up as soon as possible.
   
   b) Savings amount – how much you save will be determined by your budget, what’s affordable and your financial goals. Regularly review your budget to see if there is any more you can add to your savings. And, remember, as well as regular savings you can also make good use of gifts, bonuses, one-off windfalls and pay rises to add to your savings and boost your savings plans.
   
   c) Timeframes – your financial plan signposts the goal you are saving towards and the timeframes you are aiming for. Regularly review your savings with a modeller to check the expected outcomes and ensure you are on track to meet your short, medium and long-term goals; and to see the possible impact of saving a bit more or for a bit longer.
   
   d) Products - in simple terms, for savings goals of less than five years, you should look at cash-based products such as bank and building society deposits and Premium Bonds. For savings goals of more than five years you can also consider risk-based investments such as shares. Make sure you know what’s on offer in your workplace and in the wider market; all workplaces will offer a pension and some may offer share schemes and corporate ISAs. For all investments, regularly review that they are still in line with your plan, your attitude to risk and that the costs and performance is in line with your expectations.
   
   The value of investments can go up and down and you may get back less than invested.

5. Your financial plan – in its simplest form a financial plan sets out what you want to achieve, by when and how much each goal will cost. This is then the master plan to guide your savings and investments. Your circumstances and needs will change over time so, like with budgeting, it’s a good idea to revisit your financial plan regularly – say once a year or when your circumstances change.

So, this January, why not review these five areas? For a few hours’ investment, you can make a difference to your current and future finances, put yourself in control and improve your financial wellbeing.