As 2023 draws to a close, your attention might be turning to what the new year may have in store, making now the perfect time to think about your goals and resolutions.
New year resolutions typically revolve around healthy habits such as improving your diet or doing more exercise. But as well as focusing on your physical wellbeing in 2024, there are some useful resolutions you could make to give your financial wellbeing a healthy boost, too.
Keep reading for five practical financial resolutions that could help you to enjoy a prosperous new year.
1. Set up an emergency fund, or top up an existing one
Do you have a pot of savings you can fall back on in an emergency? If you haven’t, now is the time to fix that. If you have, take the time to check how much you have and ensure you’re holding the funds you need.
Ideally, your emergency – or rainy day – fund should have enough money to cover normal expenditure for three to six months. With the rising cost of living, you may find your household bills have risen. So, it’s wise to check whether your emergency fund needs topping up to reflect this.
If you’re self-employed, or have many dependants, it may be worth keeping more in your emergency fund, perhaps as much as 12 months’ worth of household expenditure.
Keeping a pot of savings in an easy access savings account can be a reassuring financial safety net in the event of an unexpected expense. Whether your boiler breaks down, or you’re injured and unable to work for several weeks, your emergency fund could help you meet these unforeseen costs without hampering progress towards your long-term financial goals.
2. Define your long-term financial goals
It’s all too easy to focus on the present and forget to think ahead for the future.
Yet, having clear long-term plans can help to keep your financial resolutions on track and motivate you to make certain that your money is working for you.
Long-term financial goals could focus on saving for retirement, building a healthy deposit for a new home, or funding a trip of a lifetime. Alternatively, there may be a combination of things you want to plan to achieve.
Once you’ve defined your goals, you can plan for how and when you’ll reach them.
3. Top up your pension and pay your future self first
If you’ve yet to retire, and happen to be in the fortunate position of having extra disposable income, resolve to use it to pay your future self first, by increasing the amount you’re contributing to your pension.
Pensions are one of the most tax-efficient ways to save for your future, because the contributions you make are usually topped up with tax relief from the government.
For the 2023/24 tax year, the Annual Allowance – the limit on how much you can contribute to your pension while receiving tax relief – stands at £60,000, or 100% of your earnings, whichever is lower.
In effect, this means that, as a basic-rate taxpayer, a £100 contribution would only “cost” you £80, while the additional £20 would be supplied by the government. If you’re a higher- or additional-rate taxpayer, you could benefit from an extra 20% or 25%, respectively, by claiming it through your self-assessment tax return.
With this in mind, the start of 2024 could be the ideal time to claim any additional tax relief you’re entitled to, as the deadline for completing your self-assessment tax return is 31 January 2024.
4. Review your investment portfolio
Saving money is just one element of growing your wealth. You also need to make sure your money is working as hard as it should be.
If you have large sums of money in a cash savings account, although it may be generating more interest than in many recent years, it may still be growing at a lower rate than inflation.
Read more: 14 rate rises in a row: How rising interest rates could affect your savings
Achieving the right balance between risk and reward is crucial if you want your wealth to reach its full potential.
By diversifying your money across a range of assets, including shares, bonds, property, and cash, you can reduce the impact of stock market falls on your overall portfolio.
The appropriate amount you invest in each asset will depend on several factors, including your long-term goals, your investment horizon, and your individual risk profile.
We can help ensure that you have the right asset allocation for your long-term goals, and that it is updated and rebalanced as required.
5. Write or update your will
The new year is a good time to write your will and set out your desires and wishes for your estate after you pass away.
If you already have a will, check to make sure it’s up to date. This is especially important if your circumstances have changed, as your current will may no longer reflect your wishes.
For example, significant life events, such as the birth of a child, marriage, or divorce, can shift your priorities, and you may decide that you wish to make some changes to your will.
While you’re thinking about your will, take time to review your wider estate plan and check that it still aligns with your circumstances and desires.
Most people want to leave a legacy to children or grandchildren but, if you don’t plan carefully, your estate could be subject to a potentially hefty Inheritance Tax bill, which could put an unhelpful dent in the wealth you pass on to your family and loved ones.
Read more: 5 ways estate planning can help you leave more for your family
We can help you evaluate different strategies to preserve your legacy, including charitable giving, using lifetime and annual allowances, setting up trusts, and taking out insurance.
Get in touch
If you’re resolving to form some good financial habits and increase your financial wellbeing in 2024 and beyond, please get in touch.
Email hello@bluewealth.co.uk or call us on 0117 332 0230.
Please note
The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
Blue Wealth Ltd is not responsible for the accuracy of the information contained within linked sites.
Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.
