Sorting out your finances
One of our most popular New Year resolutions after keeping fit or losing weight is to sort out our finances. But making such resolutions is easy – keeping them is a different matter.
A more realistic approach may be to set yourself one financial goal a month over the coming year. This way you should find it easier to stick to your good intentions and, by the end of 2007, you should have reason to celebrate. Here are some suggestions:
• January – Think about switching your bank account, if you haven’t already. Start by going back to basics. How good a deal are you getting from your bank? If you generally keep a healthy balance in your account, does your bank pay you interest? If not, switch to one which does. If you go into the red from time to time and end up paying fees, look for accounts with fee-free overdrafts. See www.moneyfacts.co.uk for the best deals.
• February – Update your will. If you have not done so, make a will. If you have made one in the past, check that it is up-to-date. Dying without a will means your money may not go to the people you want. A will can also be used to reduce potential Inheritance Tax bills. If you have life assurance policies, consider writing them in trust for your dependents so they don’t form part of your estate on death.
• March – Check your savings rates. Many of us open savings accounts and then forget to keep a check on the interest rates. Profit making financial institutions make their money out of our apathy. Find out what rates you are getting and then look in the weekend money pages in the press to find the best buys. Set up a cash ISA so you don’t have to pay tax on your interest. Act before 5th April to use up your 2006/07 ISA allowance.
• April – Reduce other borrowings. Clearing debt should always be one of your top financial priorities. There is little point having savings if you are in debt as you normally earn less interest on your savings than you are paying on your debts. Start by paying off your most expensive debts first, such as store and credit cards. Paying off chunks of your mortgage can also make sense.
• May – Change your credit card. If you are having problems clearing your credit card balance post Christmas, transfer to a new card with a 0% introductory rate. It is no longer so attractive to keep switching your balance around as many providers now charge transfer fees when you move. But you will normally get up to 12 months at 0% which will give you a headstart.
• June – Consider a re-mortgage. Are you paying too much for your mortgage? Just as it makes sense to shop around for the best rates on your savings, it is also important to check the competitiveness of your mortgage, although it is important to check any potential penalties for switching. Make sure you are not stuck on your lender’s variable rate. There are plenty of cheap deals around.
• July – Get tax relief on your life assurance. You may now be eligible to buy life assurance with part of your allowable pension contributions and get tax relief on your premiums. The cost of life cover generally has been going down in recent years. So providing your health has not deteriorated since you took out your current policy, you may be able to save money by taking out a pension term assurance policy.
• August – Shop around for your insurance. You won’t necessarily be able to do this immediately as it will depend on your renewal dates. But make a note to shop around for cheaper motor and household insurance policies before you pay your next annual premium.
• September – Reduce your outgoings. Energy bills have risen steeply over the last two years so why not see if you can switch to a less expensive energy supplier. Using your previous bills, internet services such as www.uswitch.com or www.switchwithwhich.co.uk can work out if you would be better off with another provider. These services can also help you find cheaper home phone and broadband suppliers.
• October – Boost your savings. By cutting back the cost of your insurance and other outgoings, you will be able to boost your savings. Set up a standing order so that the money is taken out of your account before you have time to spend it on anything else. Build up a contingency fund in an instant access account and then start thinking longer term.
• November – Top up your pension. Since April 2006, when the new pensions simplification rules were introduced, there is much more scope to top up your pension. You can receive tax relief on contributions up to the value of your annual earnings (subject to a maximum of £215,000 for the 2006/07 tax year and £225,000 for 2007/08). If you don’t want to put more in your pension, top up with ISAs which also have tax advantages.
• December – Keep tax to a minimum. Make sure you are not paying too much tax. Use up your annual ISA allowance and top up your pension as already mentioned. Other tax efficient investments include National Savings Certificates. The above information does not constitute advice.
If you would like advice please contact your financial consultant.
Wesleyan Medical Sickness provides specialist financial advice for dentists. For further information call 0808 100 1884 or visit http://www.wesleyanmedicalsickness.co.uk/