Getting to grips with your financial affairs at the start of a New Year is always a good idea, and it will not only help you to save money in the coming months, you should also find you are better placed to make money from your investments. Here are my top financial planning tips for 2016 –
1. Have a financial plan – Financial planning may be something you associate with businesses, but that is why businesses often have a lot more money than individuals. You do not need to create an incredibly detailed plan with profit forecasts for your household of course, but that is not to say you should not be creating a set of financial objectives for the coming year. Once you know your goals, you can work out how you will achieve them.
2. Budgets – Yes, budgets sound boring, but they are far less boring than a lifetime of penury which you could easily face if you never budget. Avoiding budgeting will only lead to stresses and strains because you do not have enough money coming in to cover your lifestyle.
Think about areas where you are spending money unnecessarily and cut them out. For example, unused gym memberships, buying coffee each morning on the way into work, unused subscriptions for magazines or Netflix. These can soon add up and you are literally throwing money down the drain, so stop paying out for things you do not use. You should also compare your insurance and utility bills to get a better deal each year, and only borrow if you are buying something substantial, like a house or car.
3. Risk – Taking risks with investments is something you need to consider carefully, because it is not wise to take risks that are likely to leave you finding it hard to sleep at night. You can afford to take higher risks for longer-term savings such as pensions, because if things do not go your way then you will have time for markets to recover. But money set aside for short-term savings goals such as saving for a deposit on a new home should not be risked.
4. Insurances – Home insurance is one thing, car insurance is obligatory, but for many people that is as far as they get. But what if you became critically ill and you were not able to work for a period of time? It is worth expanding your thinking on insurance to income protection and critical illness cover. It could save you from losing everything at the very time you need support, and is likely to cost less than you think.
5. Write a will – Around two thirds of us do not have a will, yet by refusing to make one not only are we leaving behind a major headache for our loved ones, we are also potentially handing our worldly goods over to the Treasury, which gains tens of millions of pounds each year from people dying intestate.
Writing a will does not have to be complicated, especially if your financial affairs are relatively simple, and it can save your estate a lot of money in inheritance tax if you would fall into this bracket. Many people think only the very rich pay inheritance tax, but thanks to a combination of rising house prices and little movement in the IHT thresholds over the years, many people now become 40% taxpayers for the first time after they have died. It does not have to be this way, so take the time to write a will. But speak to a solicitor, as home-made wills can often cause more problems than they solve.
It may take a bit of time to put all of this in place, but if you consider the savings you could make, the improvements you could potentially see in returns, and the additional protection you could have for you and your family, this is certain to be time well spent.
About the author:
Anna is founding Director of Addidi, a financial services boutique for women. A Chartered Financial Planner and Certified Financial Planners. Prior to founding Addidi, Anna was the Managing Director at Fiona Price & Partners, the first business set up specifically to provide financial advice for women by women.
She graduated from Hull University and has a Masters from the London School of Economics. She is a Chartered Financial Planner, won the Unbiased’s Financial Adviser Award in 2014, she was ranked No 1 female advisor by Financial Advisor in 2015, whilst Addidi has featured as a Top100 New Model Adviser in 2012, 2013, 2014 & 2015.
Away from work, she is married and a mother of 2 girls. Her interests are her family, travel and current affairs. She has served as councillor on Rochester City Council, her local Parish Council and was a non executive director for the social enterprise, Fair Finance from it inception in 2005 to 2014.
