Improve your financial wellbeing – five top New Year’s resolutions

At a glance

  • New Year is the perfect time to put healthy money habits in place and start the whole family off on the right foot.
  • Whether it’s downsizing your debts, making the most of your tax allowances, or writing a Will*, there are lots of ways you can improve your financial wellbeing.
  • We can help you make resolutions you’ll actually stick to – and keep your money working hard for you and your family.

We’ve probably all got one or two money habits that we’d be better off without. Leaving your self-assessment tax return until the last minute for example or skipping an ISA contribution if the family budget’s a little tight.

New Year is a perfect time to reset your money habits – and start with a clean slate.

Begin by making a list of all the habits that you know you’d like to change or need to change. Don’t panic if it seems like quite a long list – just start with the most urgent one, or something that feels achievable.

Spending habits often involve the whole family – so making some resolutions together can work wonders for avoiding arguments! You can encourage younger children to get involved by saving some of their pocket money each week for something they really want.

Seeing that money grow ‘all by itself’ (thanks to the magic of compound interest) is encouraging, whatever age you are.

These are our five top resolutions to set you on the path to financial wellbeing.

1. Work out how much you’re really worth

Working out how much you’re worth can be surprisingly reassuring. Tot up all your assets, then think about whether each one is working hard enough for you.

Do you have a lot of cash sitting in the bank, losing value because inflation is still higher than average interest rates? If so, this could be a good time to talk to a financial adviser about moving some of that money into the stock market.

If you decide to do this, however, keep some cash easily accessible for a ‘rainy day’ emergency. You might face an unexpected bill, or need to help another family member through a sticky patch.

Six months’ salary is a good rule of thumb, or for older people without a fixed income, up to two years’ essential expenses.

2. Downsize your debts

As important as it is to know how much you’re worth, it’s even more important to know what you owe. That way, you can recognise when normal debts become problem debts.

Listing all your expenditure is something your financial adviser can help with – it’s part of ‘cashflow modelling’ and it gives you an accurate snapshot of all your outgoings, and income. You can see if you’re still paying for subscriptions you thought you’d cancelled, or how much you’re actually spending on food each month.

Check your inbox for any reminders about unpaid bills, too.

Living beyond your means is easy to fall into – most of us have been there and many of us rely on credit to tide us over occasionally.

We know that having family conversations about over-spending or debt management can become emotional. It can help to have a financial adviser who’s one step removed from the family, to explain your choices, and we’ve had plenty of practise advising families facing challenging times.

The link between problem debt and mental health is well recognised so be on the lookout for signs of others struggling with what they owe.

You can also speak to Citizens Advice or MoneyHelper, both government-backed organisations, if you want debt-management advice, too.

If your finances are healthier, you could think about downsizing a bigger, long-term debt such as your mortgage. It’s surprising how much you save in interest by paying off an extra £100 a month.

3. Keep using your tax allowances

Are you making the most of your tax allowances so you pay less tax?

Your ISA allowance means you can invest up to £20,000 tax-efficiently each year. You can invest in cash, shares or funds and you won’t pay Income Tax or Capital Gains Tax (CGT) on any gain you make.

Those tax-free allowances are handy too if you have capital gains or want to make gifts to your loved ones – and don’t forget, your spouse or civil partner can use their allowances too.

The current CGT allowance is £6,000, but this will halve to £3,000 in 2024/25.

Although most allowances ‘reset’ at the start of the tax year others, such as the gifting allowances, can ‘carry forward’. So, if you or your partner didn’t use a gifting allowance last year, you might be able to gift double the amount this year, using the ‘carry forward’ rule. The annual gift allowance Is £3,000 and this can be carried forward.

.You can gift £250 to as many people as you wish In one tax year provided they have not benefited from the £3,000 annual gift.

Be aware that tax rules can change – and those like ‘carry forward’ can be quite complicated. So it’s always worth speaking to your adviser about the most tax-efficient way to invest, save or gift.

4. Keep your retirement plans on track

Retirement may seem a long way off when you’re busy balancing family budgets. This year don’t let your personal long-term plans take a back seat. It’s never too late to start saving for retirement.

Pay attention to your pension – if you’re not in the company pension scheme, join it. By law, your employer must contribute 3% of your relevant earnings to a pension plan. Some employers pay more, and if you increase your own contributions, they may increase theirs, too.

If you already have a pension, the start of the year is a good time to review it with your financial adviser. Could you pay more into it this year? Are you comfortable with where your money is invested, or have your values or attitudes to risk changed in the last twelve months?

If there have been some changes to your family or work circumstances, it’s always worth thinking about how this affects your long term plans – and your short term tax planning.

5. Make a Will and Power of Attorney*

Possibly not top of your New Year to-do list, but making your Will is one of the most important pieces of financial planning for your family’s future that you’ll ever do.

It’s easy to put off making your Will, especially if you’re still undecided about who should get what, or how much.

Your Will is your opportunity to reward and recognise all the people – or charities – who have meant something to you in your life. Once you’ve decided to make a Will, it’s important to talk to your family members about your plans and decisions, so that everyone’s clear what your wishes are – and why. Especially in the difficult days following your death.

What happens if you die without making a Will? The rules of ‘intestacy’ – dying without a Will in place – mean that the government decides where your money and assets will go. Many people assume everything defaults to their spouse or civil partner – that’s not always the case.

We help many people start the conversation about making a Will, and we recommend that you review it every few years. Our lives don’t follow straight lines; new grandchildren come along, new jobs, or new relationships. So you should always check your Will to make sure it still reflects your wishes.

You can change your Will as many times as you like, and having open, honest conversations with family members about it is almost as important as the document itself.

Appointing a Power of Attorney is essential, too. A Power of Attorney means that, if you’re not able to make your own decisions about managing finances, property or medical care, you’ve appointed someone you trust to act on your behalf.

There are two types of Lasting Power of Attorney: health and welfare, and property and financial affairs. They’re similar to a living Will – legally empowering your family or friends to look after you and your finances if you lose mental capacity.

Without a Power of Attorney, you may find yourself in legal limbo if you aren’t able to look after your affairs either on a temporary or a permanent basis. And your family may not legally be able to access your savings, pay your bills or set up direct debits for months.

It’s easy and straightforward to set up a Power of Attorney or make a Will. We’re happy to guide you through – it’ll put your mind at rest.

*Please note that Will writing and Powers of Attorney involve the referral to a service which is separate and distinct to those offered by St. James’s Place and they are not regulated by the Financial Conduct Authority.

Making your money work harder

Starting this year in control of your finances gives you and your family a sense of financial wellbeing. We all need a regular ‘money MOT’, and talking to your financial adviser will help you achieve your short- and medium-term goals, without losing sight of your long-term plans in later life.

Speak to us today, and enjoy a happy, healthy and wealthier New Year.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested. An investment in equities does not provide the security of capital associated with a deposit account with a bank or building society.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Cash ISAs are not available through St. James’s Place.

SJP Approved 19/12/2023

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