9 Steps in your Financial New Years’ Resolution
When it comes to new years’ resolutions you probably vow to give up chocolate, do more exercise, relax more. So now you are a few weeks into it, how is going so far?
In all this starting and breaking and starting again, getting a handle on your personal finances is a new years’ resolution you can keep and thankfully it involves little effort, no fighting yourself not to eat that, no 6am alarm going off to get you up so you go for that run.
Just after your tax year or getting your tax credit statement is the perfect time to do an annual tidying up of your budget, bank accounts, debts, investments and insurances.
Here are 9 steps for straightening up your finances:
Get to know your debt load.
How much do you owe, and how much are you paying in interest? There are a few sites that will compare what you’re paying in interest with what’s available now, and consider refinancing your mortgage or asking your credit card company for a lower interest rate. If you want to take advantage of the 0% balance transfer offers on credit cards, which are available, make sure you’ll be able to pay off the transferred balance in full before the promotional period expires — and resist the temptation to run up new debt on the old card. If you need help, get it.
Chip away at that debt.
The question has always been whether you should you start paying off the balance with the highest interest or pay off the smallest bills first. Although starting with the highest interest rate makes the most sense mathematically, researchers found that people are more motivated to continue with a debt-reduction plan if they pay off a small debt in its entirety rather than merely a chunk of a bigger one. Also known as the “snowball approach” paying off one debt gives you the momentum to keep chipping away until that debt is cleared.
Update your budget.
There are loads of ways of doing up a household budget, paper & pen or online. You should revisit your household budget at least annually especially if you’ve undergone a major work-related change like getting a big promotion or switching from two incomes to one, if you’d like to have one partner stay home with a child or go back to school full-time, the best way to adjust to being a single-income family is to start living like one six months beforehand. This will show you any weak spots in your budget or expenses you’ve overlooked. It will give you a nice addition to your savings, as well. If you are stuggleing with this give is a shout.
Tally up your rewards.
Credit card points, airline frequent flyer miles, fuel cards points — many of these rewards have expiration dates. Go through your various loyalty club memberships, so you can use your rewards before you lose them. If you have to pay a fee to participate (through a credit card’s annual fee, for example), calculate whether the value of the rewards offsets thae amount of the fee.
Revisit your insurance.
Dig out your life insurance, your pension, your house & car insurance policies. Make sure your life insurance is suitable for your life now, is it up to date, compare the premiums, charges and cover levels. Especially if you have kids, make sure your life insurance cover is adequate. Do you understand the policy? If not seek advice.
If you’re in a family with a stay-at-home parent, get life insurance for that spouse, too. A lot of people don’t do this because they only think of life insurance as a replacement for lost earnings, but a surviving spouse can use that money to pay for child care or pay off some loans.
Do you know what the charges are on your pension? How the investment is doing? Is it on track to give you the income you need in retirement?
If you need or want advice, or if you want to check if you are paying to much? 074 910 3938
If you have points on your driver’s license which increased the price, see if a safety driving course could help lower your premium.
Can you reduce the amount of cover on your house insurance, shop around when the renewal comes in?
Check your credit report.
You can log on to www.icb.ie and order your check history report. Get it so you can find and correct any mistakes. When a mistake drags your score down, it can prevent you from getting a credit card or a mortgage, or, you could find yourself paying more than you should to borrow money.
Examine bank statements for mystery charges.
If you don’t do it regularly, go over your bank and credit card statements to make sure you’re not being charged fees you don’t know about, or paying for subscriptions or services you never use. Sometimes direct debits can run on even after you have cancelled them. If you see a charge you don’t recognize, it’s a good idea to check it out. Sometimes thieves who traffic in stolen credit card numbers will make a small, innocuous purchase to test if an account is still active before going on a shopping spree.
If you’re one of the growing number of people who gets paperless statements from your bank and credit card company, go online and either save or print out statements for the past year. Most of that information is available for a limited time, and if you need to retrieve it after that, you might have to pay the institution a fee for copies of your statements.
Throw stuff out.
Experts advise hanging onto any financial documents that pertain to your taxes for seven years, since the revenue can look back for six years if your income comes into question. Savings, credit card and bank statements that don’t have any tax significance should be kept for a year. ATM deposit slips, withdrawal receipts and cancelled checks that don’t pertain to your taxes can be thrown out as soon as you’ve verified that the transactions are accurately documented on your bank statements. But hang onto tax-related receipts like charitable contributions made by cheque or tax payments that you deduct.
As always, if you are confused or need help, speck with an expert and get independent advice.
If you need more information or help, give us a call.
The above if for information purposes only and does not constitute financial advice in any, we recommend that you speck with us before making any financial decisions. We recommend a holistic approach to financial planning and we can help you put your plans in place.