MFS Director Kevin Edwards explains why it’s essential to give your finances a makeover at least once a year to ensure you keep your family in great shape…
“A New Year often means that we take a fresh look at our finances,” says Kevin. “Over Christmas most of us stretch ourselves financially and we have some time off work so that we can worry about the implications of our generousity!
“Over the past few years the nation’s financial concerns have heightened as the economic conditions have worsened. Where once we would worry about our money not working hard enough for us or the main income earner being taken ill, we now worry that jobs will be lost, the difficultly of finding another one and how we would pay for our household bills in the interim.
“Keeping our family financially safe and secure is always going to be paramount, and there are several things that you can do to take the weight off your mind, and your finances.
“Clearing debt should be the first priority. Having debt is a very common problem, however high you income is. However deep your pockets are, we are all human! Step two is to make sure that the household has an adequate emergency fund and this means building up enough of a buffer to cover 3-6 months worth of expenditure. This money needs to be accessible so that can be used to meet any unexpected short term expense,” Kevin advises.
“For those of you that have savings/money that you are able to investment, there are several options. If you’ve got cash in deposit accounts, you need to make sure that you hedge your bets and have a combination of fixed and variable rates of interest, as well as holding these accounts at different institutions.
“However holding too much cash over the medium to long term in deposit accounts is not tax efficient, especially with our record low interest rates at the moment. In fact, you will actually end up with less buying power as inflation currently exceeds the interest rates on offer by some margin.
“If you do have savings, it’s financially worth following the tips below:
- Maximise your ISA allowances – there aren’t many investments that have tax concessions! Remember tax year end is in April so make sure you’ve checked how much unused allowance you have well before then.
- Consider National Savings and Investments. Their Fixed-Term Certificates and Premium Bonds are Tax-Free.
- Consider repaying some or all your mortgage early (the cost of borrowing will rise, it’s a matter of when), making additional pension contributions, saving for school/university fees or boosting your savings. One of these, or a combination, might work best for you.
- Review what you are doing regularly and look at your financial assets as a portfolio, not as individual elements in isolation. This will help ascertain if your investments match your attitude to risk, if there is appropriate diversification to ensure that risk is spread and if all elements of your portfolio are tax efficient.
“Once you’ve taken the time to assess where you are financially and how you can improve your financial stability for 2013, it might be time to take the next step and consider if you have got Wills and, if so, are they up to date?”
Find out next month when we’ll hear from tax specialist Grace Steele of Geldards and find out the real reasons you should make a Will and what are the key things to consider.