Wealth expert Chris Marais explains the habits you need to adopt to help you financially prosper this coming year and beyond.
The new year is well under way – and what better time to start getting your financials in order? Resolutions don’t just have to be linked to miles on the treadmill, making some financial resolutions for 2022 is a great way to keep you on track for your goals.
This article includes five resolutions to consider for the new year; however, a top tip, start with the most urgent and easy to address, tick that off the list first before you think about taking more on.
Here they are, the resolutions to put you on the right path to achieving your goals…
First, get back to basics. Why not simply add up all your assets? It’s surprising how reassuring this can be. Do you have a lot of cash in the bank, depreciating in real value because of inflation? It could be time to think about taking the plunge and move some of this to the stock market.
People’s biggest regrets are rarely things done, but complex things left undone because they were just too fearful, such as stock-market investing.
That said, do keep some money back for emergencies – at least six months’ salary is sensible, or for older people without a fixed income, up to two years’ essential capital may be advisable.
It is easy to fall into a habit of living beyond your means – most of us have been there at some point.
Be careful to recognise when it’s happening and if you are concerned, start making plans today to get yourself into a more favourable debt position. Get organised by going through your post and email inbox for any notices you may have had about unpaid bills. Even the best of us can neglect the odd demand.
If your finances are healthy and there are no penalties for doing so, consider paying down your mortgage – it’s amazing how much you save in interest by paying off an extra hundred a month.
And if you or a member of your family is in serious trouble with debt, maybe due to the COVID-19 pandemic, speak to Citizens Advice or Money Helper, both are government-backed organisations that can help.
When it comes to tax reliefs and allowances throughout the tax year, it’s almost always a case of ‘use it or lose it’. This also applies to the annual ISA allowance, for instance. You can invest in cash, shares or funds and any growth is free of income tax and capital gains tax.
Tax-free allowances are also available if you have capital gains or want to make gifts to your family and friends. If you have a partner, they’ll also have their own allowances that they can take advantage of.
Having a financial advisor in your corner can really help you to make the most of these tax allowances. The tax allowances available can be generous, but as the tax rules are constantly changing and are often complex, so it’s very easy to miss out.
If you’re employed, a pension scheme is a necessary part of your rewards package. By law, your employer must contribute at least 3% of your relevant earnings into a pension plan and if you pay in more, they may pay extra too.
Therefore, if you’re not already a member of your company pension scheme – join it!
You may already have a pension but perhaps it’s time to ask yourself if could you put more into it this year? Do you understand where your money is invested and does it still align with your values and risk appetite? It’s easy to move your pension plan, but it’s worth looking into what your options are first.
Even though it can be difficult to think about, it’s important to decide what will happen to your assets after your death.
Without a Will, the rules of intestacy mean that they may not necessarily go to your loved ones. It’s also important to review it whenever circumstances change. Not only does this guarantee your wishes will be followed, but it also makes it much simpler for grieving relatives to handle your estate.
A Power of Attorney could be described as a type of living Will. There are two types of Lasting Power of Attorney: health and welfare and property and financial affairs.
This means that your family or friends can look after you and your finances if the worst happens. Without a Power of Attorney, one person with no family who suffers a severe mental impairment such as dementia could find themselves in legal limbo for a substantial amount of time.
By starting the year with greater control of your finances, you’ll also gain a greater sense of financial wellbeing. Just as your health needs a regular MOT, so do your finances. As exciting as short-and-medium-term goals such as a new home, children or a better paid job are, long term goals such as retirement should also be a priority.
Chris Marais is the Head of Marketing Propositions & Content at St. James’s Place Wealth Management