New year’s resolutions are all about improving your life, so making better use of your money should justify at least one resolution. Making a resolution is the easy part, of course. How do you typically fare when it comes to keeping them? Here are my top three resolutions for 2018.
Apparently it takes 21 days of doing something for it to become a habit. That’s three whole weeks. No wonder most of my new year’s resolutions tend to last as long as the Christmas decorations.
The trick is to avoid huge goals that will be difficult to achieve. All they do is make us feel discouraged.
Instead, make goals that are achievable in the relatively short term. This doesn’t mean they have to be all about the now. When my clients and I are working on their financial plans, I encourage them to think about what they want in the medium to long term, but there will be many small steps along the way that they will need to take to achieve the long-term goal.
It’s these smaller steps that I would focus on if I was making personal finance goals or resolutions for 2018.
1) If there is one resolution you make – and keep – this year…
If there is just one thing you achieve this year it should be to make sure you are investing enough for retirement – and you should look at this jointly with your partner. It’s about what is available to the household, rather than your pot and your spouse’s pot.
WHERE DO I START? Simply find all your most recent pension plan statements and look at the projections of income after retirement.
If it doesn’t look like it’s going to be enough to give you the retirement you need, then you will need to step up contributions, or, if you are part of a workplace pension scheme, perhaps contribute to an AVC – Additional Voluntary Contribution. Contributions to AVC schemes, like pension contributions, are tax-exempt.
NEXT STEP: Make an appointment to talk to your payroll or HR person about your options.
If you can manage two personal finance goals this year…
2) Sort out your estate plan.
Have you made a will? Has your partner? Do you need to review your will? If you are a business owner, do you have a succession plan, and if so, what are the tax implications of passing on your business to the next generation?
WHERE DO I START? Decide who you would like to benefit from your estate, and how you would like your share of your business to be passed on.
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NEXT STEP: Make sure you have documented your wishes. You don’t necessarily need a solicitor to create a will, but there are rules that must be followed to ensure the will is valid. They can be found online at the Citizens Information website.
If you are going to make a personal finances resolution, you might as well make it a good one.
Making sure you are on track for retirement and that you have made plans for your estate are crucial, but they are just two parts of what should be your overall financial plan. You will get much better results – a better life – by looking at all these things together, because they are all connected. It’s called a financial plan, and, contrary to what you might think, making a plan is not that difficult, with the right help.
3) Open the bonnet and take a look
WHERE DO I START? Start by taking a look at what’s going on right now. This can be big picture. What investments do you have? How risky are they? How is your pension fund – or funds – looking? What do you have in your current account? Do you have savings? Property? Shares in single entities? Include your spouse or partner in this examination. You want a snapshot of the household finances. Will your assets provide for your medium to long terms goals or commitments?
Next, consider how your household would fare if either you or your partner were unable to work due to illness, or if any one of your investments went under? Are you protected? Are you insured for too much? You only need insurance to cover your commitments, which may be declining if you have paid off your mortgage, for example, or your children are financially independent. Too much is made of selling insurance – it’s in the broker’s interests a lot more often than it is in yours. Proceed with caution on this one.
WHAT NEXT? You may be thinking that you can’t tell much from opening the bonnet of a modern car, which is a valid observation. Expert help is available: a mechanic for motor and a no-strings attached financial adviser for your finances. To know how much insurance is too much, or whether you are over-exposed to risk you can’t handle through your investments, or if your pension is under-funded for the age at which you plan to retire, book an appointment. It’s that simple.
It’s that easy. That is definitely a small, easily achievable resolution that could lead to untold improvements in your life.
So there you have it. One, two or three achievable resolutions. I expect a call from you before the third week in January. Remember, 21 days. Let’s do this.
The Money Advisers is a fee-only financial planning firm based in Naas. We guarantee unbiased financial advice free from conflicts of interest. We work with high net worth individuals and company directors based in Leinster.