As another tumultuous year come to an end, there is much to take stock of. The world has experienced significant inflation and cost of living rises. The UK has seen a new prime minister take charge. The passing of Queen Elizabeth II and the accession to the throne of King Charles III are marks of a new era. Such changes will affect your finances in one way or another, and now is the right time for taking financial stock. Looking back at how markets, interest rates, inflation and investment decisions have affected your finances will help start off the new year on the right foot. Fora tailored review of your finances, you can talk to one of our independent financial advisers at any time at www.plutuswealth.com.
The outgoing year
Whether you set New Year’s resolutions or not, a look back at the past 12 months is a wise move for keeping a close eye on your finances. It is a long enough period to show you which decisions are paying off and which may need to be altered. It is also enough time for new products to come on to the market that may offer better alternatives. Finally, it could simply give you confidence that your decisions are sound and that staying on the same track is your best option.
The good news
Even in a turbulent year such as this, there will be positives to take away in terms of your finances. After all, we have been here before over the past few years, so we know how to weather a storm. Market gains follow market losses, and bull markets come after bear markets. So wherever your investments may be, there will be good news to celebrate or green shoots to nurture.
If you have succeeded in paying down debt – such as a mortgage, loan or credit card – mark it as a major win. Any debt reduction will reflect favourably on your credit score and give you some breathing room for whatever comes next. Investments may be coming to fruition, and pension pots will be slowly growing.
The not-so-good news
Rising interest rates will not be welcome news to everyone. If you are on a variable or tracker mortgage, for example, you may have seen your monthly payments increase. Added to this, the ever-rising cost of energy has put a dent in everyone’s disposable income. This is precisely why a financial review can ensure you get back on track in time for the new year.
Steps to take now
Start by taking a systematic look at everything your finances encompass. For example:
· Mortgages and loans. Review any applicable interest rates, monthly payments and remaining balance. Are you on track to repay them? Are any coming to term in the coming year? What changes can you make, if any? Looking at alternative products may give you a lower interest rate or better repayment terms. Consider any penalties or fees in your calculations, although keep in mind that even when included your repayments maybe lower in the longer term.
· Pensions, investments and savings. Are you making the most of pension relief? Are your investments and savings seeing the returns you envisaged? It may be the end of the year, but there is still time before the end of the financial year. Now is the time to maximise pension relief and personal allowances, and there are three months in which to make those changes.
· Insurance policies. For those policies that may be coming to term in the coming year, getting started early on looking for renewal alternatives will likely pay dividends.
Making the necessary changes
It may be that you are satisfied that things are on track, in which case there is nothing further to do. Chances are, though, that some tweaks – minor or significant – may be required.
· Alternative products. New financial products come onto the market regularly, and it may be there is a better alternative to what you have now that makes better financial sense. Finding anew mortgage or loan product with more favourable rates to your existing products could give you some financial relief. The same goes for insurance policies. It is more beneficial to switch at the end of a product term than to let things automatically move to a provider’s standard variable rate. In fact,it is often better to switch providers altogether, so do not be afraid to look elsewhere.
· Tax wrappers and allowances. Making the most of your tax allowances is key to ensuring every penny works hard. Review pension allowances and relief options: if you are not getting the most out of them, see what more you could be doing that will. ISAs are better than a standard savings account, for example. Paying into a pension, which will unlock the ‘free’ government contributions to your pension pot, is another.
· Look at the longer term. If you have some disposable cash or are unlikely to need to access some of your money for a period of time, consider investing it in a fixed-term product. They offer higher returns and are an excellent way of saving for the future – for your children’s education or for a deposit on a house, for instance.
Taking financial stock together
You are not in this alone. Our Plutus Wealth team of independent financial advisers is always on hand to help you review your finances and make changes – at any time of the year. Talk to us now instead of putting it off,and we can make sure your money is working hard for you. Give us a call on 0207871 5200 or write to us at email@example.com and we will put our heads together to make your finances better next year.