6th April marks the beginning of the 2018/19 tax year. What better opportunity to get your personal finances in order, and get you on your way to hitting your goals?
Here’s the Octopus Choice run-down of 10 resolutions you might want to consider for the new tax year:
1. Manage your debt
Any high-interest debts you have, such as credit cards, can be a real drag on your finances. Sorting out a plan to pay these off, or moving the debt elsewhere, probably ought to be your first port of call – it’s likely that the interest you’ll pay on debt may outstrip the interest you’d earn by saving or investing that money instead of paying it off.
2. Contribute – and consolidate – your pensions
Pensions remain the most tax efficient way of investing for you and your family’s future – contributions made into a pension come from income before it has been taxed, whereas payments into an ISA are made from earnings after income tax. Higher earners will see big benefits, too, as many will become basic rate taxpayers in retirement.
You’re also able to save up to £40,000 a year into your pension, compared to £20,000 a year in an ISA.
And so, assuming your immediate financial priorities are on track, it makes sense to contribute as much as you can as early as you can. For example, if you saved £800 a year from the age of 20, your pot would be worth £46,000 more at retirement than if you contributed £600 instead.
Now might be a good time to look at your monthly income and outgoings, and work out whether you can increase the amount you pay out of your gross salary each month. Pay rises and bonuses are also a great time to make increases to your pension contributions, as the effect of doing so is cushioned by the extra pounds in your pocket.
It might also be worth combining your pensions, making them easier to manage. You could also transfer them into a self-invested personal pension (SIPP), allowing you to invest in a range of asset classes, rather than being restricted to whatever your pension provider is offering.
3. Make the most of your ISA allowance
A new tax year brings with it a new ISA allowance (£20,000 for the 2018/19 tax year). ISAs allow investors to put money away without paying tax on the returns they make – so it’s always a good idea to make the most of your allowance as quickly as you can in the tax year, in order to benefit from that glorious thing: compound interest.
4. Manage your risk
It’s important that you’re comfortable with the level of risk in your portfolio. Your personal circumstances can change fast, and so you should monitor your finances at least every six months to make sure you’re happy with where your money’s invested.
5. Think about cutting back your spending
Making a budget and sticking to it is tough, but can be the difference between meeting your long-term goals and going into debt. So, if you haven’t already, why not start now? There’s a bunch of apps available, like Money Dashboard or Squirrel, to help you get off the mark.
6. Save or invest automatically
And if you’re cutting back on some expenditure, it makes sense to put the money you’re saving to work. Making regular contributions to your savings or investments plans is one of the best ways to grow your nest egg quickly. Setting up automatic payments each month will save a lot of time, and is a good way to discipline yourself into doing it.
7. Pay your bills on time
Settling any bills as soon as you get paid is one of the most effective ways to make sure you are only spending what you can afford. It also reflects favourably on your credit score, which could result in some welcome savings when borrowing money in future.
8. Switch your bank account
The average person could be £70 better off if they switch their bank account, according to research last year. But, despite this, most people don’t.
In 2013, for example, the average customer stayed with their bank for 17 years. To try and encourage people to switch, the Current Account Switching Service was introduced, making it much easier. But, since then, still less than 10% of current account holders have changed bank account. So, stop dawdling, and see if switching bank account could help you get a better rate.
For those with savings accounts, we have our very own savings service here at Octopus, called Octopus Cash. Designed to make life simpler for savers, it’s totally free to use, and lets you target savings rates up to double what you could get on the high-street.
9. Keep tabs on personal finance news
Staying informed about the world of personal finance and how it is changing means you’ll be able to make more informed and up-to-date decisions. Checking in every few days on the headlines might mean you’re able to avoid making any silly mistakes.
10. Consider getting financial advice
Providing for you and your family is obviously important, but, understandably, not everyone is confident with investing money. If that’s the case, you should seek the help of an independent financial adviser to help you plan your finances. Why not check out Vouchedfor to find an adviser near you.