Have a clear, concise financial goal for the year. It isn’t good enough to say, “I want to have my credit card paid, and more money in the bank”. Instead, you should say, “I have the balance on my credit card down to £0, over £5,000 in my savings account, and a fully funded ISA.”
Financial Resolution 2: Prioritise Your Debts
Not all debt is created equal. Make a list of your liabilities and organize them by the interest rate. Those with the highest rates (most likely your credit cards) should be paid off immediately. It does no good to invest money while you are paying 19%+ each year.
Financial Resolution 3: Open an ISA
If you haven't done so already, open an Individual Savings Account (or ISA for short). You can invest up to £7,200 (£10,200 if you are 50 by the 5th April 2010) per fiscal or tax year. Speak to a financial adviser like Bestinvest to get more information, advice and assistance in setting up an ISA.
Financial Resolution 4: Establish a Monthly Savings Plan
Monthly Savings Plans can be set up for your ISA or investments in Unit Trusts. This enables you to benefit from Pound Cost Averaging. This is where you invest small amounts on a regular basis. This means that when prices are high your monthly contribution will buy fewer units but that when prices are low your investment buys more units.
This continuous drip-feed method of purchasing your investment means that the average purchase price paid over any given period is going to be lower than the arithmetical average of the market price. It also instills a useful discipline in the investor, creating the saving habit; it is also a strategy that does benefit from volatile markets.
Financial Resolution 5: Set up an SIPP/Pension
Pensions are long term saving and investment vehicles which provide an income during retirement. Any contributions are tax deductable against income tax. If you are a basic rate tax payer the pension company will claim back any tax due. For Higher rate tax payers, the rest can be claimed back by self assessment. One important factor to consider is that any contributions made into a pension are locked in until retirement.
SIPP’s offer the widest choice of investments and if you have existing plans it may well be beneficial to consolidate all your investments under one plan. With Bestinvest you may well benefit from lower administration costs as well as getting advice on the investments you can make.
Financial Resolution 6: Review your Mortgage Arrangements
Check when your mortgage is up for renewal. In the current climate your present lender may no longer offer the most attractive rates. Speak to an independent broker. Not only will they search for the most attractive rates on the market but also some (including Bestinvest) will call you back with the information when the renewal date approaches.
Date: 5th, January, 2010
Author: Charmaine L. Horan
ADVICE TO READERS
While this website is checked for accuracy, we are not liable for any incorrect information included. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into transactions.
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