We begin the new year with resolutions in mind, usually surrounding old habits that die hard and fad diets to shed that Christmas weight. Common resolutions include improving fitness, losing weight and saving money which show we care about our physical and financial health – and the two can often be linked. Financial worries can lead to serious stress, and not feeling in control of our finances can negatively impact our mental health, and thus our physical health is affected.
With a focus on financial health and wellbeing, we asked our team of Financial Planners at Progeny for their advice in making effective financial resolutions for the year ahead.
Pay yourself first
Financial Planners, Robert Appleby and Tom Parkes suggested the idea of ‘paying yourself first’ for a financial resolution.
Robert said: “Something that I have been doing since I was 22, is to ‘pay yourself first. That means setting up pension contributions, investments and savings to all leave your bank account the day after you get paid. That way, you never really feel like you ever had it and the temptation to spend it on things that you don’t necessarily need (nights out, takeaways, clothes, gadgets etc) is removed. If you always wait until the end of the month, you’ll always find you don’t have anything left to invest for your future self. This is simple but effective.”
Tom Parkes added: “Making saving a habit and automatic whilst trying your best to increase the amount you save over time is one of the best methods to create wealth”.
If you are interested in the concept of incremental increases and enhancing your savings not just to help you meet your expectations in 2022, but for say, a pension in 20 years’ time – Financial Planner, Luke Norman, goes into more detail in his recent blog here.
Patience is bitter, but its fruit is sweet
Financial Planner, Josh Castle, covers ground from start to finish with his advice, from the importance of building your credit rating to emphasising the importance of contributing to your pension sooner rather than later.
“Having some credit against your name is good for building your credit record, but you need to be careful not to take more than you can afford. A mobile phone or a credit card you pay off each month can help build a record early. Also, money saved earlier into a pension is likely to be worth more than money saved later. This is the power of compound growth where gains are reinvested with the aim of producing more gain, which repeated over time, can dramatically increase the value of your fund.”
Financial Planner Emily Marland also brought up the topic of pensions -“For many of us, our pension can seem so far into the future that we tend to put off thinking about it in the here and now. But, like all aspects of financial planning, the sooner you engage with it, the more beneficial it’s going to be for you”.
For those struggling with the concept of investments as far-reaching as a pension, Josh offers some additional advice: “I think good advice generally takes a while to come to fruition. Not much in life will make you rich quick. Bad advice can often have a big impact straight away.”
All in favour say ISA
Harry Mackie, Financial Planner, shared the advice he learnt from his father who also works in the financial advice industry: “He would say that once you’ve built up a decent level of cash savings that you feel comfortable with, you could then divert as much of your excess income as possible into tax efficient investments, such as an Individual Savings Accounts (ISA) and treat that as the start of your longer-term savings.
Harry also says that “where possible it can be beneficial to use the ISA allowance each year because it’s ‘use it or lose it’, there are no carry forward opportunities, and ISAs along with pensions are your first port of call for saving due to the tax advantages”.
Best foot forward for financial resolutions
The above advice not only gives us the chance to put our best financial foot forward for the year ahead, but to aim to ensure positive financial health is a resolution we uphold for the long term.
Please get in touch today with one of our advisers to discuss your financial resolution and long term financial plans.
