Financially speaking, how did 2018 work out for you? If you set yourself financial resolutions at the start of the year, did you manage to achieve them? If not, what went wrong? And, if you’re a new investor, what resolutions should you take to make your money work harder for you in 2019? The first few days of a new year aren’t just a time for reflection, they’re a perfect opportunity to get your monetary house in order and set your personal finances up for a more successful twelve months. So, while you’re making and breaking resolutions about eating more healthily, going to the gym more often and finally learning to play that guitar which has been gathering dust, here are some financial resolutions you should resolve to stick to in 2019.
Calculate your worth
If you’re going to set (and reach) a financial goal, you have to know where you’re starting from. That means having a complete warts-and-all picture of what your net worth is right now. Take a close look at your incoming and outgoing finances (current spending, saving, investments and pension plans etc.) to establish exactly what your assets and liabilities are. It might sound like an uncomfortable way to start the new year, especially after the ups and downs of 2018 and the expenses of Christmas time, but knowledge is power. What you discover will be a significant indicator of where you need to make changes in your spending and saving habits and how much money you’ll be able to invest in improving your financial future.
Check your ISA allocation
With all sorts of flashy products on the market, the humble ISA sometimes gets ignored, which is madness when you consider the tax-free benefits. In 2018/2019, the allocated investment limit for ISAs was £20,000, and in April 2019 we’ll discover if that amount will increase again. Whether you opt for a cash ISA or look into the stocks and shares or innovative fund products, it’s a good idea to use your allocation fully, if you can afford to, as you can’t carry it over. You can split your £20,000 investment across different ISAs if you prefer a bit of diversity. The main thing to remember is to invest what you can before the yearly deadline expires and you move into the next financial year’s allocation.
Make your pension work harder
If you’ve got a pension, or you are hoping to get one in 2019, you need to know about the tax relief potential. If you are a UK taxpayer, you can get pension tax relief on up to 100% of your earnings or a £40,000 annual allowance, depending on which is lower. It works like this: if you have a workplace pension or a private pension fund, you are entitled to tax relief on your contributions at the net pay stage, before income tax is deducted. That means that if you – as a basic rate taxpayer – contributed £80, your pension provider could claim the 20% of income tax back, so the amount added to your pension pot is £100. If you want to invest 100% of your earnings, if they are under £40,000, that’s no problem, but if you’re going to use your allocated yearly amount of £40,000 because you earn more than that, you can do so. This strategy will help you build up a much healthier pension pot than just your contributions alone, so make sure that you are doing so.
These are just three areas to consider as you look to your 2019 financial plans. If you’d like some advice on other strategies, please get in touch with our expert team on 01638 429975 or [email protected].