Financial fitness

Financial fitness

When the festivities are over, you’ll probably think about joining the gym, starting a diet, or pledging a dry 2017. So, why not make some financial New Year’s Resolutions while you are at it? Kay Hill has some suggestions

Christmas tends to be a time when we gain lbs and lose £s. Over-eating and over-spending can leave us all with stuffed bellies and lean wallets come January. But never fear; at this traditional time of the year for turning over a new leaf, there are plenty of positive steps you can take.

1. Get organised
If you were planning to embark on a training programme, or diet, you would think ahead, plan your goals and get everything in place to ensure success. In the same way, you need to get organised to overhaul your finances. Research by Standard Life has found that UK adults spend more time organising their music collections, photos and wardrobes, than they do their savings; 40% of adults put off organising their day-to-day budget and only a quarter regularly put time aside to review their finances. Jamie Jenkins, pension expert at Standard Life Savings, urges, “It’s easy to put off things you don’t enjoy, but keeping on top of both day-to-day budgeting and longer-term savings will help you relax, knowing things are under control for the future. Technology is making it easy for people to regularly review their savings online, so there’s no better time than now to get organised.”
Do it now – Find all your current account, savings account and credit/store card statements (print them out, if online) and put them in a lever-arch file. Add the monthly statements for any loans or debts. If there’s an app for your current account, download it to your phone now.

2. Demolish your debt
“The first few weeks of the New Year really are financial crunch time, as January’s and February’s bank and credit card statements (which reflect December’s spending) and winter fuel bills arrive, and many people realise that their financial situation has got out of control,” warns Melanie Taylor, debt expert at Debt Advisory Centre. Remember, there’s no point trying to squirrel away money for a deposit at today’s low interest rates, if you are paying higher interest rates on debts.
Do it now – Don’t worry about student loans; find out exactly how much other debts, like credit and store card debts, overdrafts and personal loans, are costing you, then start paying the most expensive ones off first. See the box on page 93 for some money-saving tips.

3. Build a budget
Making a budget is an essential way to get to grips with finances, especially if you are saving for a deposit. In essence, you work out how much you have to spend on essentials – rent, transport costs, utility bills and so on – then how you want to spend what is left. Research by Sun Life in its Cash Happy report showed that, while less than half of Britons work to a budget (47%), that figure reaches 60% among 18-24-year-olds, and that those who did budget reported that they were happier than those who didn’t.
Do it now – Work out how much all your essentials cost each month (remember to add in annual costs, like car insurance or train season tickets, and divide by 12) and subtract from your monthly income, to find what you have left. Then decide how much to save and how much to spend on the fun stuff, like eating out and holidays.

4. Prepare for the worst
We all hope 2017 will bring health and prosperity, but while you are recovering from the hangover, Andrew Simpson, lead panel solicitor for Ensure Inheritance, says it’s a good time to think about some ‘what ifs’. “Some people think they are indestructible and that because they aren’t old, they couldn’t possibly die,” he says. “But making a Will is really important, especially as a lot of people buy a house together without being married and may make wrong assumptions about what would happen if they died.” Supposing you suddenly became so ill or disabled, that you couldn’t manage your affairs? “We recommend that everyone consider a Power of Attorney – people are wary of them as they don’t want to give up control of their finances, but you can set the circumstances as to when it kicks in,” Simpson says. “Making a Will and Power of Attorney will give you peace of mind – it’s all about making decisions about who is getting what and who is controlling what, while you are still able to do so.”
Do it now – If you are buying or saving jointly with an unmarried partner, get that Will and Power of Attorney done this month (and no, it really isn’t tempting fate…)

5. Shake up your savings
Yes, the interest rate on savings is dire, but that’s no excuse to give up trying to find the best home for your money. Research by peer-to-peer lending platform RateSetter reveals, “46% believe that the current average interest rate of 0.3% for instant access savings (the lowest on record) is a reasonable rate of return and two thirds (63%) have not moved their money around to get a better return for over a year”. Hopefully First Time Buyer readers are more savvy.
Do it now – Get on a comparison site and find out if you could do better. At the time of writing, for example, listed instant access accounts paying 1%, fixed savings at 1.65% and current accounts at 5%.

6. Check your Credit Score
According to research from Experian, while 71% of Britons believe they have a good or excellent history of managing credit, two thirds of them have never actually checked their credit score, so might be in for a nasty shock when they try to get a mortgage deal. “Understanding how to properly manage your credit accounts and knowing what lenders look for when reviewing a credit application is the key to building an excellent credit score. We understand that people can find the topic confusing, but the good news is that it is possible for everyone to take control,” says James Jones, head of consumer affairs at Experian, which now offers a free credit score check.
Do it now – Get a simple, free credit score check and, if it isn’t as good as you hoped, make sure that any mistakes are rectified and then put a strategy in place to improve matters.

7. Become a Money Master
New research from NS&I reveals that over four million Britons feel out of their depth when it comes to managing money on a day-to-day basis – and that’s a recipe for making mistakes. Jill Waters, retail director at NS&I, advises, “Millions of us may be struggling, without a basic knowledge of money, savings and how to plan for different life stages. Having a good understanding of personal finance will help you to make more informed decisions.”
Plan ahead – If you’re planning any big financial decisions (like opening an ISA, taking out life insurance, or finding a mortgage), try to educate yourself as much as possible. Visiting is a good place to start.

8. Learn how to haggle
Research by reveals only three in 10 consumers regularly negotiate during a purchase, with 73% saying they are too embarrassed to haggle. But there are big savings to be had for those who give it a go.
Plan ahead – Practice haggling while on holiday, or in situations where it is the norm, like renewing mobile phone contracts or buying a secondhand car. Soon, you’ll be ready to haggle on the big things, like your first home!

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