Get your finances into shape for 2007

January is always a great time to put in place those changes that will ensure you make the most of your cash in the coming 12 months. As Independent Financial Advisers we are always on hand to help and heres some suggestions to make 2007 a really prosperous year:

• Shop around for credit cards with the lowest rate of interest. Credit cards are a great source of short term cash to get you through Christmas but can be crippling if you leave debt outstanding into the new year. Make use of the 0% interest offers that are still avialable, transfer balances to play the credit companies at their own game and the if you keep the monthly repayment at the same level as would have been levied before the switch you'll steadily eat into the debt instead of paying all that interest.
• Contributed the maximum possible to your pension by the end of the tax year (5th April). We can show you how to benefit from 39% tax relief whereas the norm is 22% and for higher rate taxpayers the savings are even greater.
• Use nil rate tax bands of a spouse or civil partner. If your other half is a lower rate taxpayer than you, transfer savings into their name to achieve a higher return on bank or buiding society accounts.
• Dont let your ISA allowance go to waste. Make sure the taxman doesnt benefit from taking a chunk of the interest from earned on your savings by switching to a cash ISA. Cash ISAs often pay more interest than standard accounts because the banks think they have your money for the long term yet many allow instant access to your cash so this is a canny way to maximise returns without tying up your money. A stocks and shares ISA is a great home for longer term funds that you can afford to tie up and historically the stock market has provided far greater returns than cash. You dont even have to declare ISAs on your tax return.
• Review your mortgage to ensure that you aren't paying over the odds each month. This often represents the single greatest saving that we can make for clients and it pays to play one lender off against another. Dont ever settle for what your current lender is offering just because youre afraid your contractor status will limit your options - there are plenty of lenders keen to lend at the same interest rates as a permi but the trick is to talk to the right peple and avoid poorly trained and unhelpful branch staff to make sure the contract is'nt going to be a problem. Using a good flexible mortgage could also take years off of your mortgage term too.
• Shop around for your insurance. Whether its life, car or home insurance you could be overpaying by hundreds of pounds a year unless you shop around.
• Switch utility providers. The average household bill for gas and electric is now £1,000 pa! You can cut this dramatically by keeping an eye on discounts.
• Make a will. Bite the bullet and do this to make sure your assets go to who you wish when you die. Our experience is that clients feel relieved to put this to bed and then they dont have to think about it again. A will can also be really effective in Inheritance Tax planning to ensure that the taxman doesnt take a chunk out of your estate. Encourage your parents to do likewise, review it regularly and you will undoubtedly save a lot of problems later on.
• Review your financial protection. Make sure your income is protected against accident or illness. If you have dependents look at life cover.
• Pay off lingering debts; review your monthly budget, for example if you eat out less could you afford to clear certain loans than if you continued to pay the minimum every month?
• Keep your finances in strict order from January onwards. The average Briton wastes £1725 a year on unaccounted spending, money that could work much harder if used elsewhere. Draw up a spreadsheet of your monthly income and expenditure and make it as detailed as possible. Identify areas where you can reduce or eliminate unneccesary expenditure and increase the amount you save. Have separate bank accounts for mortgage repayments/utility bills/food and day to day expenditure. If you are a sucker for spur-of-the-moment spending keep a certain amount of cash on your person at all times and leave your cards at home. If you can get into good habits with your money you'll have much more left by next January where it should be - in efficient savings vehicles such as your pension and ISAs and less outstanding on credit cards, loans and overdrafts.

Best of luck from us all for 2007!

Return to Articles page