Tax treatment depends on your circumstances and is subject to change
You don’t need to wait for the start of a new year to make a resolution to yourself that you’re going to start to manage your money better. If you often find yourself thinking “I just need a little bit more”, then there are simple changes you can make now that could make a big difference to your finances.
If your aim is to be more comfortable and better prepared to deal with unexpected bumps, read our 10 commandments of managing money.
Check to see if you are overpaying for energy services and insurance. You can do this by looking at the direct debits and standing orders regularly coming out of your bank account. And looking out for renewal letters. Then, you could use a broker or comparison website to shop around for a better deal. Our own research revealed that 41% of us avoid finding a cheaper provider for our energy needs. Despite the fact doing so could save you a considerable amount.
A large debt or number of debts could make any exciting upcoming plans, or even everyday life, difficult to enjoy. If becoming debt free is important to you, prioritise clearing a debt with the highest interest rate first. The higher the rate, the more of your money you are handing over to the lender. If you can make over payments, this will go a long way to clearing the debt more quickly. Clearing a debt can take time and commitment, so don’t overwhelm or put pressure on yourself to pay off more than you can afford to. If things do start to feel too much, you can always speak to a debt counsellor.
It’s completely normal for parents to want to give children a financial head start in life, and there are plenty of ways you can lend a helping hand. Our own research revealed that more than half of Brits aged 18 to 45 have savings that have been added to by their parents (56%). And that more than half of UK parents (52%) have gifted up to £5,000 to their children with no expectation of it being paid back. While it’s great to want to help, it shouldn’t be to the detriment of your own plans. Especially if it affects how much you have to live on in retirement. It’s fine to say no and be more me, myself and I.
Some months it can feel like the money you earn is gone as soon as it reaches your bank. What if, when the money leaves your account, it goes somewhere that could make you money in return? There are various ways you can invest your hard-earned cash. And some will have a better return than others. For short-to-medium-term savings look to Cash ISAs. While interest rates may not be great, an ISA does offer a tax-efficient way to save. You can pay in up to £20,000 a year into a Cash ISA and you won’t have to pay tax on the interest. You should check to see how much notice you need to give to access your ISA savings. Especially if you think you could need to access the money quickly, like in an emergency. If you’re thinking about saving for your future, make sure you unlock the power of a pension. You get tax-relief at your highest marginal rate on all contributions up to the equivalent of your annual salary or £40,000 (whichever is lower). Because your money is locked in until you are at least 55, a pension could have many, many years of growth. And the boost from compound interest that your pension receives during those years could give your retirement fund a massive boost.
Setting a budget and sticking to it takes some willpower. Especially when it’s so tempting to want everything now, and it’s equally as easy to achieve this (thanks to credit cards). Budgeting gives you peace of mind and keeps you out of the red. Firstly, arrange for any direct debits and regular payments to come out as soon as you get paid. Then you’ll be able to clearly see how much money you have left for the rest of the month. You could then use a budgeting app to plan other expenditure such as essentials and days out to make sure you keep on track until you next get paid.
It’s often said that there’s no such thing as a free lunch. That may be true, but there are times when you could be offered extra money. Like when you are automatically enrolled into a workplace pension scheme. One of the biggest benefits of this type of pension compared to other types of savings tools is that your employer also makes contributions into your pot. Over your working life these additional contributions could mean you have thousands of pounds more for your retirement. And that’s exactly why you should think twice before opting out.
Have you thought about how you would manage financially if the unexpected was to happen? There’s nothing worse than a broken-down boiler or a car that won’t start, especially when it happens out of the blue. One way to prepare for the unexpected is to set up an emergency fund. As a rule of thumb, your emergency fund should store enough money to cover at least 3-6 months living expenses.
Separating your money will make it easier than ever to manage. If you keep your money for bills in one account, savings in another and spending in a third, you’ll always know exactly what you have. This also allows you to allocate a certain amount to each account when you get paid, so it’s easy to see what you’re spending and the amount of money you have left as the month goes on. Utilising your online banking service is key for this to work.
Whether it’s your TV package, mobile phone or the desire to own the latest gadgets, keeping up with technology can be costly. Try not to be sucked in by introductory offers where the rate you’re paying now could shoot up at the end of the deal. Shop around for your technology as some stores offer better guarantees than others. And if you’re tempted by buy-now-pay-later deals, always check the interest rate as you could end up paying back more than what the product is worth.
While it’s great you’re saving for your future, not regularly reviewing your pension could mean you have a lot less in your pot when you need it. If you’re a few years away from retirement, maybe even a decade or two away, it might not feel like your pension clock is ticking. In reality, it is! Making changes now such as reviewing your pension, tackling poor performance and high charges, and making sure your pension is properly tailored to you, could make all the difference to your future.
We can help you to make the best possible decisions when it comes to your pension.
Taking pension money early is not right for everyone as it will leave you worse off in retirement. Also, tax treatment depends on your circumstances and is subject to change. That’s why it makes sense to get help from a regulated specialist.
