Finance

Pile on the ££££££s

It’s coming up to that time of year when we all promise ourselves a New Year makeover – to drink less beer and eat more vegetables, spend more time at the gym and less at the takeaway. This year, for a change, why not focus on your financial health? Kay Hill offers a 10-step plan to pile on the pounds next year!

REVIEW YOUR FINANCIAL HEALTH

As with any self-improvement resolution, you need to know what you are dealing with before you can make sensible decisions – it’s no use going on a diet if you don’t know your weight or BMI! So, the first job is to work out exactly where you are right at this moment in time. Gather together your current account statements, check the balances in all your savings accounts and ISAs, make a note of the current value of any shares or investments and look at what you owe on credit cards, store cards, loans or overdrafts, plus any tax owed if you are self-employed. Ideally, put all these figures on a spreadsheet or in a notebook so you can revisit it regularly over the year and see if things are getting better or worse.

FOCUS ON THE DEBTS

and find out the interest rate you are paying on each. There are some things like student loans that are not usually worth paying off (as they are eventually written off), and interest-free loans for furniture that won’t save you anything by repaying, but others, such as credit card debts, could be racking up 30% interest a year! In addition, reducing your debts will help you pass affordability checks when you look for a mortgage. In general, if you have savings, and they are earning less interest than the rate you are paying on your debts (in the current climate you can take that as a definite), then try to repay what you owe, while holding some back for emergencies.

LOOK AT YOUR OUTGOINGS

Next turn to your current account. If you’ve ever got to the end of the month and wondered where the money goes, this is the opportunity to find out! Firstly, check to see if there is anything on there that shouldn’t

EXPERT COMMENT

With so many savings products on the market, it can be dif cult to know which ones will suit your needs the best and what you should consider before making a decision. It’s important to understand what you’re signing up for, so before you start saving, check out your provider’s small-print or key facts document, which should tell you about your rights for cancelling the product and any associated charges that may apply. It’s easy to get embroiled in the latest nancial craze or follow in the footsteps of what family or friends are doing, but what’s right for them is almost certainly not right for you. Setting personal goals and objectives puts you in charge of your own nancial destiny and you’ll feel con dent and secure in the savings decisions you’ll have made. Setting short-term, mid-term and long-term nancial goals is an important step towards becoming nancially secure. If you’re looking to purchase your rst home in 12 months’ time, your money will need to be easily accessible and not put into a highrisk investment. For a cash-based product, such as an ISA, make sure you research which provider is offering the best interest rate and at a xed return.

Will Lenehan Will Lenehan, , Financial Adviser, OpenMoney OpenMoney

be – subscriptions you’ve forgotten about, duplicate insurance policies and so on. Then weigh up carefully the regular payments you do have – do you actually go to the gym you’re paying for, watch the Sky or Netflix subscription, read the magazine?

CUT YOUR BILLS

When you’ve pruned anything you are paying for that you don’t use, see if you can cut the price of the ones you do. If you are renting and pay your energy bills direct to the supplier, did you know that you can change suppliers? Even if you are on pre-payment meters you may be able to move to a cheaper deal. Broadband, mobile phone and TV subscriptions have generally become cheaper in recent years, so consider changing supplier or ringing up to negotiate a cheaper tariff. Make a note in your diary to shop around when annual policies like contents insurance, pet insurance and car insurance are due.

WATCH THE PENNIES

Sometimes small savings can add up, so as well as looking at the big items in your monthly spending, consider whether you can make small but regular savings – cycle instead of using the tube or car, make your own coffee and lunch, try own-brand products on your weekly shop, cook at home more. In the words of one supermarket – every little helps!

MAKE A PLAN

When you have your outgoings under control, you should be in a good position to set some realistic goals for the future. Work out a budget (a spreadsheet could come in handy – you can find a downloadable or printable spreadsheet, plus some really useful advice on making a budget, at moneysavingexpert.com/banking/budgetplanning/). When you have factored in all the necessary spending for the year, along with things like Christmas and birthday celebrations, you will have a good idea of how much you can save each week or month while still having enough for the occasional treat or unexpected cost.

OPEN A LISA

When you’ve worked out how much you can save, think carefully about how best to do it. First of all, open a Lifetime ISA (LISA) if you haven’t done so already and if your purchase is at least a year away. These are individual savings accounts, so if you are buying with a partner make sure they open one too. Each person can save up to £4,000 a year and the Government will add a 25% bonus, so that’s potentially £1,000 of free cash each year towards your deposit, as well as tax-free interest. The best paying LISA at the time of writing was Moneybox, paying 0.6%.

OPTIMISE SAVINGS

After that, depending on your timescale, you could look at fixed rate accounts - Zopa, for example, pays 1.35% if you can lock away £1,000 upwards for a year, or 1.61% if you take a two-year fix. If you plan to buy sooner then you could consider a notice account – Secure Bank Trust pays 1.1% if you can give 120 days’ notice; a regular saving account with an early withdrawal option – Coventry Building Society will pay you 1.05% if you commit to a regular deposit of up to £500 a month; or stick to instant access – at the time of writing, Shawbrook Bank was offering 0.67%. You might also consider changing your current account to one that pays interest (Nationwide FlexDirect pays 2% interest on up to £1,500), or one that allows you a highinterest savings account (RBS and NatWest customers, for example, can save £50 each month into a linked account paying 3.04%).

BOOST YOUR EARNINGS

There are lots of ways to make a little bit extra, and the Government allows you to make up to £1,000 trading income each year without paying tax on it. So, for example, you could make things to sell on Etsy, do babysitting or dog walking, mow lawns and so on without being bothered by the tax man. Selling secondhand items that you have previously owned and used yourself never attracts tax, so if you have a wardrobe full of unwanted clothes or a loft full of vintage childhood toys, selling via eBay, Depop etc can give your savings a tax-free boost.

MAKE A WILL

Yes, we know you don’t want to think about it, but making a Will enables you to make sure that your savings end up with the right person if the worst happens. If you are not married to your partner, for example, and you die without leaving a Will, the money will go to your parents, not to your partner. We would recommend seeing a solicitor (expect to pay upwards of £100), but at the very least use a Will writer (from £50) or, as a last resort if your affairs are extremely straightforward and you read the instructions carefully, buy or download a Will template, fill it in and make sure it is properly witnessed. If you get married or enter a civil partnership it automatically invalidates a previous Will, but divorce does not, so make sure to update it as your circumstances change.

EXPERT COMMENT

For rst time buyers, saving for a deposit can feel like an impossible task; but getting your nances in order takes you a step closer to your dream home. It is extremely important to get on top of your outgoings. Look at what you have coming in versus going out – and set a budget. While you may be feeling the pressure from friends to head out for dinner and spend money, why not look at areas you can pull back on? Make an effort to stay in more and see if there are perhaps any subscriptions you could pull the plug on – even temporarily. By sticking to a budget, you will be much more likely to be able to put some money in savings each month. Consider moving a proportion of your money into a savings account as soon as you get paid – it’s much easier to stick to a budget when you know how much money you have remaining. Plus, that way the chances are you’ll end up saving more than if you were to move it over at the end of the month. A great way to kick off your savings journey is to open a Lifetime ISA (LISA) – you can save up to £4,000 per year, to which the Government adds a 25% bonus at the end of each tax year. This will help you get that bit closer to your nancial goal.

Jo Winston, Sales Director, St. Modwen Homes