The value of investments and any income from them can fall and you may get back less than you invested.

Five steps to improve your financial fitness

Whether you’re a long-term saver or just starting out, making sure your finances are in good shape should be a priority. But, where do you begin?

1.     Establish your priorities

Saving is one of the best ways to get yourself on track with your finances. But, to save with confidence you need to know what resources you have at your disposal.

Draw up a budget showing your monthly income and outgoings. Start with essential expenses that must be paid for and absolutely cannot be given up such as rent or mortgage payments, utility bills, council tax and basic food bills. Then consider where else your income goes each month and whether you could be spending your money more effectively.

2.     Set up an emergency fund

It is generally advised that you have enough cash tucked away in a savings account to cover three to six months’ worth of expenses. Hopefully, you won’t need it, but you’ll be thankful if you suffer a temporary drop in income.

3.     Pay down high-interest debt

Before increasing your other savings, it is a good idea to prioritise paying down expensive debt like credit cards. After all, you are likely to be paying more in interest on the debt than you are earning on your savings.

4.     Set your goals

If you’ve followed the previous steps you should now have a pretty good idea of how much extra you can afford to save each month. Now consider what you want those savings to achieve. If you have earmarked them for a short-term goal such as paying for a holiday or renovations to your home, it probably makes sense to place them in a cash savings account.

But for medium or longer-term goals, which might include saving for school fees, paying off your mortgage or funding your retirement, investing in the stock markets offers the potential to earn higher returns.

5.     Save tax efficiently

If you are employed, join your company pension scheme. You will benefit from employer contributions on top of your own. The government also effectively refunds any tax you have paid on your contributions at your highest income tax rate – 20%, 40% or 45%.

Contributions to Individual Savings Accounts (ISAs) receive no tax relief. However, investment returns and withdrawals are tax free.

Initially the tax savings may not amount to much. But over time, particularly if you take out an ISA every year and the value of your investments grows, the tax benefits can really add up.

Adults can put up to £20,000 a year into ISAs (so for a couple that’s £40,000) and up to £4,260 a year into a Junior ISA for a child.

To find out more about the Brewin Portfolio Service ISA, click here.

Our dedicated customer support team can also answer your questions about the service and help with your online application.

Phone: 0333 207 9003

Email: customer.services@brewin.co.uk

The value of investments can fall and you may get back less than you invested.

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.

No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us.

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