How to Boost Your Finances in 2019
14th January 2019
We often use the New Year as a time to introduce better behaviours within our daily lives, be it eating healthier or spending more time with family. But the New Year is also a great opportunity to improve your finances and set new financial goals.
Managing Director of CWM Wealth Management and HerMoney, Carol Brick has these seven financial resolutions to boost your finances in 2019.
Develop a Savings Plan
Look at your savings in terms of three time periods: short term, medium term and long term.
For the short term, everyone should have at least three times their net salary in savings, in an account they can easily access. These savings are often called the ‘Rainy-day fund’. The money is there in case of an emergency, such as a job finishing prematurely, or an accident occurring.
Research shows that the vast majority of people do not have three times their net salary in savings. This should be your starting point or your initial savings goal. Once you have this amount saved, you can then look into tying amounts over and above that into three to five years’ savings or longer. A financial advisor can advise you on your options to ensure your money works hard for you.
Set a Savings Target
Think of a savings goal for 2019. Maybe it’s to buy a new car, or go on a dream holiday. The most important thing is that this goal must be realistic. The main bills such as mortgage, heating, electricity need to be addressed every month, so choose a savings figure that is achievable. Write down this goal in a place where you are going to see it every day. Set up a direct debit from your current account or whichever account your wages are paid into, to ensure this money is put into savings every month.
Consider Alternative Savings Options
There are various ways to make your savings grow, and investing in the markets is one of them. For example, if you are saving for a college fund for your children, this is a long-term savings goal. Your accumulated funds could increase quicker and more effectively by considering alternative savings options. Speak to a good financial advisor. They will assess your attitude to risk and could invest in funds with companies like Irish Life, Zurich, etc. The return could potentially be much greater than if you deposited money into a bank account.
Review Your Expenses
Review your monthly outgoings or expenses. This is now very easy to do as there are many apps available that synopsise your spending into different categories.
Start with the largest expenses, for example mortgage repayments. Ask yourself, when was the last time I reviewed my package? For example, a homeowner who took out their mortgage in 2011, when variable rates were at their highest 4.4% could now qualify for a rate as low as 3.1% if your loan to value is less than 50%. This could mean huge savings.
Then, look at other big-ticket expenses, such as health and car insurance. Seek financial advice to review these in terms of value and suitability.
Cut Back on Unnecessary Spending
When you finish reviewing your big monthly expenses, you next need to focus on smaller items such as memberships and subscriptions. As a financial advisor, I have established savings of at least €150 per month for clients who reduced unnecessary spending. For example, I would recommend if you’re not going to the gym more than twice a week, finish the membership and join a pay-as-you-go class instead. Examine each expense individually and ask yourself is it worth it? How often do I use this? If you’re not maximising it, finish it.
Set a Budget and Stick to It
Another way to cut back on unnecessary spending is to set a budget and indulge in what I like to call ‘self-disciplined spending.’ For example, buy your weekly groceries and fuel at the weekend, take out a set amount of cash from the ATM, say €100, and don’t use your credit and debit cards during the week. This will reduce your temptation to impulse buy.
Studies show that when you can see the physical money exchanged for goods and services, you value it much more. Many of my clients have tried this technique in the past and they’ve seen their bank balances grow significantly as a result.
Another way to cut back on unnecessary spending is to shop for groceries online. This can save you huge sums as you’re less likely to be flinging unnecessary items into the trolley. You can watch your total adding up and you’ll also have access to all of the instore promotions.
Start a Pension
According to a recent study by Irish Life, over 90% of people say they are not on track with their pension savings. This is one of the most important things you can do. If you were to match the state pension, which is approximately €12,000 per annum, you would need €400,000 in your private pension fund at retirement. The vast majority of the clients we meet are completely unaware of the total retirement fund they would need at age 65. If you haven’t a pension in place, start now.
If you do have a pension plan in place, we would ask you, when was the last time you reviewed it? Do you know what you are paying in annual management charges? Do you know what it is invested in? It’s extremely important to review your pension plan on a regular basis. The whole attraction with pension funding is the tax relief. If you are earning, then you are entitled to the tax relief back on your pension payments.
For more information on how you can boost your finances in 2019, you can contact Carol Brick here>>