New Year – New Finances? January 2020 represents not just the start of a new year, but also the start of a new decade. While no one knows what their life might look like in 10 years’ time, it’s worthwhile taking the time to consider what you hope to achieve in the next decade. Do you want to buy a house, get married or start a new business? All these goals require capital so establishing what they are now will help to guide your financial planning. Whatever position you are in financially currently, this shouldn’t stop you from thinking ahead and making sure your finances don’t hold you back. To help, Maike Currie, Director for Fidelity International, offers five tips to get your finances in shape in 2020.
Get your debt in check: The start of a new year is a great excuse to establish a monthly budget that will help you to begin good money saving habits so that you’re prepared for everything that the year ahead will bring. Whether the goal is to save up for a summer holiday or just avoiding having to dip into the red at the end of the month, understanding your monthly outgoings will help you to know where you can make savings or when you can afford an extra treat.
New Year, New Me: January is the time when health and fitness goals are set and the public consciousness becomes dominated by tips on how to be healthier, lose weight or exercise more. But our financial health can often be pushed much further down the list of most women’s priorities and in some cases, doesn’t feature at all. Yet the amount you save or invest could mean the difference between retiring early in comfort and struggling to get by. Just as you might use a fitness app to get in shape, you can use a finance app or website to get financially fit. When surveyed those women that used an app to invest said they did so because it was easy and they regularly check up on their finances. And when they used an app 44% of women increased the amount they invested.
Little and Often: While it may seem far away, it’s never too early to think about the future and how you can prepare financially for retirement. According to research from Fidelity International, women continue to suffer from the gender pensions gap, with pension pots some 11% smaller than men’s pensions. However, analysis from Fidelity International in its state of the nation report, ‘The Financial Power of Women’, shows that women could close the gender pension gap by dedicating an additional 1% of their salary towards their pension early on in their careers. This is an average of just £35 per month in contributions over 39 years.
Many women and young people or part-time workers whose earnings are below the level at which they’re automatically enrolled in their employer’s pension scheme – will miss out on this chance to pay into a company pension automatically. If you, or your partner, spouse or child, is one of these people then you need to take steps to secure your own financial future. Everyone can pay into a pension and still get the tax perks; even if you lose out on the “free money” from your employer. But on the plus-side, even someone who isn’t earning a penny, maybe because they’re taking a break, say to look after a baby or care for a relative, can still save for their future in a tax-efficient way.
Expect the unexpected: Whether its equity in your home or a rainy-day fund set aside, have a plan to deal with the unexpected events such falling ill, needing extra care in your old age or having a sudden expense like a major house repair. It is good to have secure income, but you do need to keep some capital available should you need it. You should never feel that you are denying yourself a good time and the ability to live in the moment, but it’s important to make sure there is a safety net should the worst happen.
Be treat wise: For special occasions it’s more than acceptable to splash out on a loved one. Whether that’s an expensive gift, dinner or weekend break, you shouldn’t have to sacrifice the finer things in life all the time. However, make a note of your social plans and how much they are costing you. When you know how much things cost, you can factor this into your everyday behaviour.
Invest in your ISA: Why put it off till the end of the tax year when you could get your money working for you now? Investing at the beginning of the tax year gives your ISA more time to potentially grow. Even if you’re wary or unsure of where to invest right now, you can shelter your money in your ISA and make the decision a little later. You’ll have secured your tax-free savings, which is up to £20,000 for those over 18.
Children have an annual ISA allowance too. They can save up to £4,368 a year (2019-20) in what’s known as a Junior ISA (JISA). You can again pay in a lump sum or start their savings habit by arranging a regular investment that will grow nicely until they reach the age of 18 when they can top-up and continue their own ISA journey.