According to a leading price comparison website, 23 million Brits made new year resolutions for 2021. While going on a diet or taking more exercise were popular choices, a quarter of people pledged to sort out their finances.
So, if you want to make 2022 the year you finally take control of your money, here are 10 financial resolutions you might want to consider.
1. Sort your life insurance
Life insurance gives you the peace of mind that your loved ones will be able to maintain their lifestyle if you’re no longer around. It’s a simple and cost-effective way of protecting those closest to you.
If you don’t have cover in place, or you do but haven’t reviewed it for a few years, make the new year the time you finally sort out your protection. It’s really easy to arrange, and we work with dozens of the UK’s top insurers to help you get the right cover at the right price.
2. Switch your bank account
How satisfied are you with your bank? If the answer is “I’m not”, you’re not alone.
In a recent survey, fewer than 3 in 5 customers of NatWest, HSBC, Santander, TSB, Virgin Money and the Royal Bank of Scotland would be likely to recommend their current account to friends or family.
Even better-performing banks such as Lloyds could only boast a 63% satisfaction rate.
So, if you’re fed up with your bank, make 2022 the year you switch. Changing current account provider has never been easier, as all your direct debits and payments will be switched automatically, often within just seven days.
Additionally, many banks now offer valuable incentives to switch. It’s not unusual for banks to offer £100 or more in cash to encourage you to switch your current account to them.
3. Start paying off high-interest debt
Interest on credit cards and loans can build up quickly.
According to MoneySavingExpert, if you paid the minimum repayment on a £3,000 credit card debt (with no further spending on the card) it would take 27 years for you to clear the debt, with an interest cost of almost £4,000.
So, if you have a little spare money every month in 2022, use it to repay any high interest debt you have. Even making small overpayments to credit cards can significantly reduce the interest you pay, and help you clear the debt sooner.
4. Shop around for your insurance
This is Money say that, in 2020, more than 2 in 5 drivers let their insurance policy automatically renew. This resulted in £720 million more heading to insurers than if individuals had shopped around for the cheapest cover.
Whatever insurance you are buying – be it car insurance, building and contents, pet insurance or even mobile phone cover – it’s well worth spending a few minutes every year to check the prices being offered by rival insurers.
You could save a significant sum each year for just a few minutes research.
If you’ve had your life insurance a few years, or you bought it through someone like an estate agent financial adviser, it’s also possible that you’re paying too much for your cover. Get in touch with us and we can establish whether we can obtain cheaper rates for the protection you need.
5. Check your direct debits
When was the last time you went through your bank statement to check your regular outgoings?
A regular review of your direct debits and standing orders can often highlight where you can make savings. Are you paying for a TV service you never watch? A subscription for a magazine you don’t read? Or are you paying for a gym you rarely visit?
Spend some time in the new year looking closely at your bank statement to see where you can make savings – then do something positive with this extra money, like increasing your pension or saving contributions, or repaying high-interest debt.
6. Make or update your will
According to Will Aid, half of all adults in the UK haven’t made a will. Only by writing a will can you ensure:
•Your assets pass to the people you want to when you die
•Your children are cared for by a guardian you appoint
•You can divide your estate among the people you choose.
As an example, if you’re not married and you don’t have a will, your assets won’t pass to your partner when you die. This runs the risk of your loved ones not receiving the financial support or sentimental items you would want when you’re no longer around.
Writing a will is inexpensive and can give you real peace of mind. And, if you do already have a will, review it to check that it remains up to date.
7. Sort your budget
Budgeting is the cornerstone of good financial management. If you don’t know how much you have coming in and going out every month, it’s impossible for you to know how much you can save and spend.
A good rule of thumb is the “50/30/20” approach. You split your expenditure:
•50% on essential living expenses, such as your rent or mortgage, bills, food, and transport to work
•30% on “wants” such as meals out, socialising, subscriptions such Netflix, and shopping
•20% on savings and paying down debt such as loans and credit cards.
Start by working out your income and outgoings and try and stick to a budget. You’ll be amazed how much you might be able to put aside in your pension or savings.
8. Increase your pension contributions
Your pension is an incredibly tax-efficient way to save for later life. Pensions have three key benefits:
•You receive tax relief on your contributions. So, if you’re a basic-rate taxpayer, every £100 contribution to your pension costs you just £80.
•If you’re employed, your employer will typically also have to make contributions to your pension on your behalf. By law, most employers have to pay 3% into your pension. And, if you decide to increase your pension contributions, some employers will also match your contributions, boosting your fund further.
•Pensions are typically invested over a long period, as you can’t generally access the funds until age 55 (rising to age 57 in 2028). So, you benefit from compound returns – essentially “growth on growth” – all the time your money is invested.
Bear in mind that a pension won’t be suitable if you’re saving for a shorter-term goal as you can’t access the funds easily.
9. Open an ISA
Individual Savings Accounts (ISAs) are one of the UK’s most popular ways to save. That’s because all interest on a Cash ISA is paid tax-free, and all returns from a Stocks and Shares ISA are paid free of both Income Tax and Capital Gains Tax.
You can pay up to £20,000 into an ISA in the 2021/22 and 2022/23 tax years, so they are a great, tax-efficient way to save for your future.
10. Ensure you have the right illness protection
The last couple of years have shown us that the unexpected can happen at any time. If you were forced to take time off work due to illness or injury, would you be able to maintain your standard of living and keep paying your bills?
Remember that Statutory Sick Pay in the UK is, in 2021/22, just £96.35 a week, and is only paid for 28 weeks. If this is not enough for you to live on, or you’re self-employed, make the new year the time when you give yourself the peace of mind that you will continue to receive an income in the event of unexpected ill health.
Get in touch
We can help you find the right life insurance, Critical Illness cover, or income protection. We work with lots of the UK’s top insurers, and this means we can find the right cover for you at the lowest possible cost.
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