Research has found that, after health and wellbeing, pledges relating to money are the most popular New Year’s resolutions.
However, a survey found that 70% of those money resolutions were broken in 2018.
January is a great time to make some financial changes and to finally sort out those issues you have been putting off for the previous year. So, here are ten financial New Year’s resolutions you could consider making – and keeping.
1. Maximise your pension contributions
You have until 5 April 2020 to maximise your pension contributions for this tax year. So, why not make a New Year’s resolution to top up your pension contributions while you can?
You can currently contribute up to 100% of your income, with a cap of £40,000 (if you pay in more than this you won’t receive any tax relief on the amount above the contribution limit).
Depending on your income and contribution you could face issues with the Tapered Annual Allowance which could leave you with a tax bill to pay.
We can help you make the most of your pension contributions. Get in touch by email at email@example.com or call 0800 0787 182.
2. Top up your ISA
ISAs offer an excellent way to save and invest tax-free. Your annual limit is currently £20,000 and, as you can’t carry forward any allowances, you need to use it by 5 April 2020.
If you want to save for your first home, or for your retirement, you can save up to £4,000 in a new Lifetime ISA. Available to people aged between 18 and 40, you can put in up to £4,000 each year, until you’re 50. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
You can then use your remaining £16,000 ISA allowance in other ISAs; for example, a Cash ISA or a Stocks and Shares ISA.
Don’t forget also that ISA allowances are ‘per individual’ and so, if you are in a couple, you can each contribute up to £20,000 to your ISAs.
3. Use your annual Inheritance Tax gifting allowance
Each individual has an annual ‘gift allowance’ of £3,000 per year. This annual exemption means that you can gift up to £3,000 every year without it being added to the value of your estate for Inheritance Tax (IHT) purposes.
If you don’t use all the annual exemption, you can carry it forward to the following tax year. So, if you didn’t use your 2018/19 annual exemption, you can gift up to £6,000 before 5 April 2020.
4. Make a will
It’s estimated that one in three people die without having a will. Making a will can give you and your loved ones peace of mind and make sure that your money and assets go to the intended people.
If you’ve been putting off making a will, or you haven’t updated it in a while, the New Year is the perfect time to get this sorted.
5. Change your bank account
Increased competition from new entrants into the banking market doesn’t seem to be encouraging consumers to switch their current accounts. A YouGov survey found that almost three-quarters of adults (74%) think they will still be banking with a traditional high street bank in two years’ time, rather than with a ‘challenger bank’ or similar.
If you’re not happy with your bank’s charges or service, make January the time to switch. It’s never been easier to transfer all your direct debits and regular payments and many banks offer incentives for switching.
6. Shop around for insurance
According to research from GoCompare, around five million drivers in the UK still allow their car insurance to automatically renew, instead of shopping around for a better deal. This costs motorists a combined £1.4 billion a year.
Similar research from MoneySupermarket found that auto-renewing home insurance costs Brits £37 million a year.
When it’s time to renew your car or home insurance (or any other type of cover you have, such as pet insurance) it always pays to shop around. Use an online price comparison site to compare deals but remember that a low price won’t always mean the best cover for you. Balance the cost with the level of cover to get the right protection.
7. Use more cash
Figures from UK Finance show that cash is now used for just 28% of all payments in the UK. During 2018, there were 5.4 million consumers who almost never used cash at all, instead relying on cards and other payment methods to manage their spending.
However, there is anecdotal evidence that paying cash for items registers with our minds more than using a card or contactless payment. So, you may find that, if you use cash, you spend less as it’s easier to keep track of what is going out.
8. Switch your utility bills automatically
One easy New Year’s resolution to make is to shop around when it comes to your utilities as it can save you hundreds of pounds every year. However, it’s easy to forget about this or do nothing about it because of the perceived time and hassle of switching providers.
However, there are now online services that pledge to keep you on the best deal, and to automatically switch providers when your tariffs run out. There’s no longer any need for you to pay for your gas or electricity on a ‘standard variable rate’.
9. Set up your Lasting Power of Attorney
A Lasting Power of Attorney (LPA) is not just for older or infirm clients. Because you never know when you might lose capacity, having an LPA in place ensures you have a trusted attorney who can make decisions for you.
There are two types of LPA:
- Property and financial affairs – This gives your attorney the authority to deal with and make decisions about things like buying or selling property, bank, building society and other financial accounts, and welfare benefits or tax credits.
- Health and welfare – This gives your attorney the authority to make decisions about issues such as your day-to-day care, where you live, what healthcare treatment you receive, what you wear and what you eat.
If you have not yet made a Lasting Power of Attorney for yourself, make this one of your New Year’s resolutions. You have to do it while you have capacity, and once you’ve made your LPA, you will need to register it with the Office of the Public Guardian.
10. Save for your children
The New Year is a great time to commit to putting some money aside for your children.
A Junior ISA lets you save up to £4,368 this tax year into a tax-free account for your child. With a choice of Cash and Stocks and Shares ISA, you can choose an investment that suits your needs and attitude to risk, and the child can access the funds when they are 18 years old.
If your child is 16 or 17 you can also contribute to an adult Cash ISA, increasing the amount you can pay in to £24,368.
If you have maximised your ISA contributions, or you want to save long-term for your child, you could contribute to a personal pension. HMRC figures suggest that more than 60,000 children now have a pension in place.
If your child is under 18 you can pay in £2,880 per year, and, with the tax relief, this is grossed up to £3,600. Remember that this is a long-term investment and that your child won’t be able to access these funds until their retirement age (currently 55).
Get in touch
If you want help in making a financial resolution, or you need any advice about any aspect of your financial plan, please get in touch. Email at firstname.lastname@example.org or call 0800 0787 182.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.