Happy New Year! Once the parties are finished with, you can move onto the less fun activity of making New Year’s resolutions. “Saving money” is often a popular one, just like giving up bad habits and getting fit. However, little thought is given to how it is going to be achieved and the focus is often on the short term which often fails to have any real benefit in the long run. Yet unlike a two-week juice cleanse, changes made to your finances can benefit you for months or even years to come.
It’s important to be realistic and create habits that can be sustained. Many people are familiar with crash diets cutting out large food groups. People manage it for a few weeks, lose a bit of weight then can’t sustain it and a month later are back where they started. Similarly, cutting your expenditure in half will give your bank balance a boost for the first month but you’re unlikely to keep it going long term. Far better to trim spending somewhat or better still, do it in a painless way but getting better value for money out of what you do spend. For example, reviewing insurance policies can make sure they are still needed, are still providing sufficient cover and still provide good value for money. I’ve lost count of the number of times I’ve come across clients insuring pets that are long deceased!
Non-financial resolutions often involve cutting back on vices which typically has the welcome side effect of saving money. Regularly investing the money saved can reap rewards in the long run. £10 saved per week would give you £6,400 after five years with a 4% net return.
I don’t advocate chopping and changing your investments day to day but is it really likely that an investment you made many years ago that has never been reviewed, remains appropriate? Changes in legislation mean it could be in the wrong tax wrapper and you’re therefore donating more to the taxman than you need to, or the investments may be wholly inappropriate for current market conditions. Also, charges through modern plans are often far lower than older contracts, again presenting a money saving opportunity.
For more details visit www.nsurefinancial.co.uk or to arrange a free review please call 01903 821010.
By Richard Cohen FPFS ACII MCSI Chartered Financial Planner