I have been making some new year resolutions (losing weight, getting fit, etc) and thought I might need some financial resolutions. Do you have any suggestions?
This is the time when we all start to think about the year ahead and what we want to achieve.
I think all resolutions should be SMART ones – specific, realistic, achievable, realistic and time-bound. That way, they are more likely to be kept, so here are some financial resolutions I think are doable for most people.
Organise your financial paperwork. Get one of those expandable box files and label the contents. Each time you get a piece of financial correspondence, action what is required and then file it safely in the box.
Not only will you feel more organised but you will also know where all your financial paperwork is and be able to access it easily.
Some will suggest you scan the paper and keep it on your computer. Same thing, just different media.
The second resolution is to make a budget plan. Here, you may well find a computer spreadsheet is the easiest way to do things. Month by month, estimate what you are going to spend. Some of these expenditure items may be known and fixed quantities, others may be estimates but you can use last year’s payments to get a feel for this. You may need to increase the estimates to take care of inflation.
Use the spreadsheet to compare your expenditure against income and this will help you to avoid overspending.
You may then need a separate spreadsheet to list your savings, investments and pension arrangements. You can even add to this the details of any life insurance, income protection and critical-illness cover that you have. Don’t forget to add in details of any benefits that you get from employment as well.
To this spreadsheet, add the value of any other assets you have (your house, for example) and then detail any liabilities that you have. This can start to help you determine the net value of your wealth (assets minus liabilities).
You can put in as much or as little detail as you choose but I would advise you to go for as much detail as you can.
The next thing to add to your spreadsheets is a simple list of your financial goals and objectives. When do you want to retire? What plans do you have for property purchase or moving home? How much do you think you need to accumulate to have the lifestyle you want?
None of the above will cost you anything other than some time and effort (apart from the expandable box which might cost £10).
You may think my motives for suggesting these resolutions are less than honourable because if you get all this information together you might want to book yourself a review meeting with an independent financial adviser but even if you don’t do that at least you will have achieved a goal of getting yourself organised.
If I were a gambling man, I bet that being in control of your finances, if you do all of the above, will last longer than your diet or keep-fit regime.
Nick Bamford is chief executive of Informed Choice