The turn of the New Year will have no doubt brought about an abundance of resolutions but we all know that sticking to them is the hardest part. If improving your financial fitness is one of yours for 2020, we have 5 resolutions that you can follow below:-
1. Calculate your personal net worth
This isn’t as difficult as it may sound. Firstly, you need to make a record of all your assets which is anything you own that is of worth. This includes the value of any property and vehicles you own, cash and savings, investments and pensions. Remember that property prices do change over time so it is a good idea to do some online research to see what similar houses have recently sold for to give you a better idea on this.
Next, you need to detail all of your liabilities such as mortgages, loans and any finance. Your net worth is simply the difference between your assets and liabilities.
This blog from Director, Liz Beavis, explains it in a bit more detail.
2. Set budgets
Have you scrutinised your bank statements and evaluated everything you spend your money on? Completing an expenditure form can highlight areas where you may be overspending and will make you think if there are any non-essentials that you can afford to cut back on. If there is, try setting some realistic budgets and stick to them.
Make a start by downloading the budget planner spreadsheet at the bottom of this page.
3. Manage debt
Refer back to your list of liabilities. For any loans, finance or credit add details of interest rates and the date that any interest-free periods end (if applicable) as well as the minimum payment amount and the date it is due. Now make a plan as to how you will choose to clear your debt going forward, starting with those that have the highest interest rates (usually credit cards). This is dependent on Resolution #2 as the more money you manage to free up from cutting unnecessary spending, the quicker you can pay off your debts.
4. Be prepared
We always recommend that you have an emergency fund to fall back on in case of a financial emergency. We suggest having between 3 and 6 months’ worth of living expenses set aside in an easily accessible savings account to cover essential outgoings should you fall into financial difficulty.
5. Save for your future
The next step is what to do with the current investable assets you have and any surplus monthly income you can free up or create. There is always a lot to consider here including tax implications, your personal attitude towards investment risk, diversification and how long you want to invest for. It may be that you already have some investments and pensions, are they suitable for your requirements and your long-term goals?
As there is so much to think of when it comes to preparing for your future and making your money work best for you, it is always recommended that you seek professional independent advice with a regulated firm. Tools like Cashflow Modelling can help stress test your finances and look at future outcomes and whether you will have sufficient money to achieve your goals.
If you would like a no-obligation meeting with one of our experienced Financial Planners, contact us today and make 2020 the year that you stick to that New Year’s Resolution!
Rebecca Wilson, FMB Marketing Co-ordinator