15 December 2023
If 2024 is anything like 2023, we’re in for a tumultuous year for personal finances, we have seen soaring inflation and sky-high interest rates. The new year is a great time for savers and investors to get on top of their finances and make sure everything is running smoothly.
Carla Morris, a financial planner at wealth manager RBC Brewin Dolphin, said, “From savings and pensions to tax and protection, the changes you make today could have a big impact on the health of your finances in 2024 and beyond.”
Carla Morris shares her financial resolutions that could help you start the new year on a stronger footing:
“The new year is a great time to take stock of your finances and get your affairs in order to ensure you avoid making costly financial mistakes. There are a number of key things to think about so that you’re in the best place possible.”
First things first – clear the Christmas hangover
The festive season comes with added expenses, from socialising to present buying. Steep price rises mean it’s more important than ever to have a solid budgeting plan in place. Sticking to a budget can help avoid splashing out on things you don’t really need, which in turn may result in more money to put towards savings.
The new year is also a good time to reconsider your financial goals – what you would like to achieve over the short, medium and long term. It’s generally considered wise to have around six months’ worth of essential expenditure in an easy-access savings account, if you can afford it. If you already have a rainy-day fund and are saving for goals that are at least five years away, you might want to consider investing in the stock market. Although the stock market can be volatile, history shows that it tends to perform better than cash over long periods.
Check your pension is on track
If checking the value of your pension pot hasn’t been on the to-do list recently, this is the time to do so. Understanding how much money you’ve saved up will help you work out whether you’re on track to achieve your retirement ambitions. An adviser can offer support by calculating the projected value of your pension at retirement and the amount of annual income this is likely to produce.
If there’s a shortfall, you might want to see if you can top up your pension. Pensions are a really tax-efficient way of saving for the future because of the tax relief you receive on personal pension contributions. A £100 pension contribution costs just £80 if you’re a basic-rate taxpayer, £60 if you’re a higher-rate taxpayer or £55 if you’re an additional-rate taxpayer.
Revisit your financial goals
The new year is a good time to reconsider your financial goals – what you would like to achieve over the short, medium and long term. Your goals might have changed since you first created your financial plan, in which case you may need to adjust where you are saving your money and / or the level of investment risk in your portfolio.
Be tax efficient – maximise your allowances
There are a whole host of other tax allowances and exemptions to make use of each year. Many people wait until the end of the tax year to maximise their allowances, but the sooner you act, the better your chances are of realising your financial goals.
You can invest up to a maximum of £20,000 into ISAs each year to benefit from tax-efficient income and growth. You can withdraw money from ISAs whenever you like without paying tax, which makes ISAs a useful investment vehicle for pre-retirement goals as well as a tax-efficient source of income in retirement.
Other allowances include the capital gains tax (CGT) exemption and the dividend allowance. These allowances are due to be slashed again in April 2024, so you might want to act quickly to maximise your tax-free investment gains and tax-free dividend income before the changes come into effect.
Review your protection – check you’re covered
Having the right protection is crucial to ensure you and your family’s finances hold up in the event of unexpected illness or death. The new year is a good time to check any current protection policies and ensure they are up to date. If the level of cover is too low, your loved ones could be at risk of financial hardship should the worst happen. A financial adviser can make sure you have the right policies and level of cover to suit your individual needs.
Make or update your will
Making a will is one of the most important things you can do. It ensures your assets go to who you want after your death, and that your wishes are carried out as you intended. If you’ve already made a will, consider whether it needs updating – for example, if your personal circumstances have changed. Making or updating your will could make a big difference to the future of those you care about.
Concluding, Carla said:
“Becoming more engaged with your finances could be the simple financial resolution you need to kick-start the new year and avoid making costly financial mistakes. Take the time to read and review financial statements, review your pension, look at tax allowances, and set some goals for the year ahead. January is also the perfect time to liaise with your financial adviser or, if you don’t have one yet, you might decide that it’s the right time to start seeking advice. Be proactive in arranging a meeting – don’t wait for your adviser to contact you first.”
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DISCLAIMERS
The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Information is provided only as an example and is not a recommendation to pursue a particular strategy.
RBC Brewin Dolphin is a trading name of Brewin Dolphin Limited. Brewin Dolphin Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444) and regulated in Jersey by the Financial Services Commission. Registered Office: 12 Smithfield Street, London, EC1A 9BD. Registered in England and Wales company number: 2135876. VAT number: GB 365 3456 40.
For further information, please contact:
Richard Janes richard.janes@brewin.co.uk / Tel: +44 (0) 20 3201 3343
Siân Robertson: Sian.Robertson@brewin.co.uk / Tel: +44 (0) 20 3201 3026
Payal Nair payal.nair@brewin.co.uk / Tel: +44 (0) 20 3201 3342