New year resolutions: financial planning should be top of the list

To be attributed to Alan Harvey, chartered financial planner at Brewin Dolphin.

 For some it’s a yearly tradition that’s now forgotten, but according to a YouGov poll from December 2018, one in five (22%) Brits were planning to improve themselves in 2019 by making a New Year’s resolution.

 While some promise to lose weight or exercise more, New Year resolutions should also cover personal finances, using the new year as a chance to assess savings goals for the 12 months ahead. From investment strategies to legislative changes, there are a number of factors to consider this January:

 

1. Clear the Christmas hangover 

   The festive season undoubtedly comes with added expenses, from socialising to present buying, and the unexpected Black Friday bargains. A recent report estimated that the average person will spend £730 on the festivities, with one in 12 people spending more than £800 on Christmas gifts.

    For some, this means using credit card limits to help spread the expense of high-cost items, but it’s best practice to try and clear this debt early in the new year. Starting with a clean slate in 2020 will give you a fresh start, with no outstanding payments impacting on your future financial plans and savings. If you have multiple credit cards, decide which one to pay off first: it could be the one with the highest interest rate, or the one with the lowest balance; but the ultimate goal should be clearing your debts – especially as the average interest rate continues to rise. In September 2019, average credit card purchase APR was recorded at 24.7%, up from 23.4% in September 2018.

    

2. Don’t fritter Christmas money away

   It can be tempting to spend any Christmas gift money making the most of the January sales, however, adding this cash to your savings pot would likely be a much better use of funds. If you have children who have received money from grandparents and other relatives, consider using this to top up any junior ISA accounts, or child trust funds – although this will probably not be your child’s first choice.

    

3. Arrange an end of year review

    A year-end review is a familiar scene in the workplace, but you should also take stock of your personal finances with an annual review at home. Take the opportunity to examine annual statements from any ISAs or pension savings and consider whether it would be worth moving funds from one account to another to secure the best interest rates or returns. Cash ISAs have held low interest rates for some time, so switching to a stocks and shares account in the new year could prove more lucrative in the long term.

    An annual review should cover your overall investment strategy and whether you could benefit from changing tactics. Over the last 12 months we’ve seen positive returns from the UK market, but in 2020 this could change – especially with an exit from the EU on the horizon. Switching your focus to international markets, however, could also be turbulent over the next year, with presidential elections and the US-China trade war to contend with. In any case, a combination of taking sound advice from your investment advisor and holding a diverse portfolio, with investments in a range of companies across different geographical markets and sectors, should help you to navigate any challenging market conditions over the next 12 months.

    You should also review any annual allowances, including pension savings, ISAs and inheritance tax thresholds. Think about how these can be maximised before the end of the tax year and where possible, use these allowances to your advantage.

    

4. Give your savings a pay-rise

    To retain purchasing power and maintain the value of any investments and savings, you should aim to increase contributions year-on-year. Whether this is in line with an increase in salary, or reflective of inflation and changes in the consumer price index (CPI), the compound effects of this increase can boost your savings pot significantly over the long term.

    If you can afford it, increase savings by 5% or more each year for the greatest benefits. Anyone who receives a year-end pay-rise, should consider diverting the extra income straight into savings. If applicable, you could also increase pension contributions or any stakes in a Sharesave or Save as you Earn (SAYE) scheme – which can be used to save up to £500 per month. Ultimately, if the extra money doesn’t make it into your wallet in the first place, you shouldn’t miss it.

    

5. Top-up mortgage payments

    Homeowners should consider using any spare cash – whether from a Christmas gift, end of year bonus or pay-rise – to over-pay their mortgage before any limits re-set, which is usually at the end of the financial year. Payments can be made either in the form of a lump sum top-up or an additional monthly contribution, depending on the terms set by your lender. You should, however, watch out for any hidden fees that could come into force if you breach any upper limit for over-payment.

    Before committing to over-paying a mortgage, it’s also important to compare interest rates from what you are borrowing to what you might earn on any savings. For the majority of borrowers, mortgage rates are usually set higher than average savings rates, so it makes good sense to over-pay.

    

6. Do some homework

•   Becoming more engaged with your finances could be the simple financial resolution you need to kick-start the new year.

• Take the time to read and review financial statements, do your own research into alternative savings products, and set some goals for the year ahead.

• January is also the perfect time to liaise with your financial advisor or, if you don’t have one yet, you might decide that it’s the right time to start seeking advice.

• Be proactive in arranging a 2020 meeting – don’t wait for your advisor to contact you first.

 

 

– ENDS –

 

PRESS INFORMATION

For further information, please contact:

Libby Keiller libby.keiller@framecreates.co.uk / Tel: 0141 559 5840

Peter McFarlane peter.mcfarlane@framecreates.co.uk / Tel: 0141 559 5840

Richard Janes richard.janes@brewin.co.uk / Tel. +44 (0) 20 3201 3343

Anita Turland: anita.turland@brewin.co.uk / Tel: (0) 20 3201 4263

Payal Nair payal.nair@brewin.co.uk  / Tel: +44 (0) 20 3201 3342

 

NOTES TO EDITORS

Disclaimers: 

• The value of investments can fall and you may get back less than you invested
• The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.
• Past performance is not a guide to future performance.
• This information is for illustrative purposes only and is not intended as investment advice.
• No investment is suitable in all cases and if you have any doubts as to an investment’s suitability then you should contact us.
• Please note that this document was prepared as a general guide only and does not constitute tax or legal advice. While we believe it to be correct at the time of writing, Brewin Dolphin is not a tax adviser and tax law is subject to frequent change.Tax treatment depends on your individual circumstances; therefore you should not rely on this information without seeking professional advice from a qualified tax adviser.

About Brewin Dolphin

Brewin Dolphin is a UK FTSE 250 provider of discretionary wealth management. With £45.0* billion in total funds, it offers award-winning personalised wealth management services that meet the varied needs of our clients including individuals, charities and corporates.

We give clients security and wellbeing by helping them to protect and grow their wealth, in order to enrich their lives by achieving their goals and aspirations. Our services range from bespoke, discretionary investment management to retirement planning and tax-efficient investing. Our focus on discretionary investment management has led to significant growth in client funds and we now manage £40.1* billion on a discretionary basis.

Our intermediary business manages over £13.8* billion of assets for over 1,700 advice firms either on a discretionary basis or via our Managed Portfolio Service.

 

In line with the premium we place on personal relationships, we’ve built a network of 32 offices across the UK, Jersey and Dublin, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core.

 

*as at 30^th September 2019