Lockdown good chance to get finances in order

Through necessity, rather than choice, many of us have had more time on our hands this January. So why not use the time wisely and take care of some of the life admin tasks that we are all occasionally guilty of postponing to another day.

Here are five areas you should consider to get your financial affairs in order.

1. SET GOALS

Having clear financial goals to work towards will give you a sense of purpose and motivation to spend less, and to save and invest more throughout the year ahead.

To ensure you achieve your financial resolutions, it helps to break the bigger goals down into more manageable bite-sized objectives that you can gradually work through bit-by-bit to create better financial habits.

2. MONEY OPTIONS

Find out if you could save money by refinancing your mortgage, car loan or student loan.

If you have high-interest debt, make a plan to pay it down. If you don’t have enough extra money in your budget to make a big dent, investigate credit cards with a 0% introductory balance transfer offer.

Also check the interest on your savings. Could you deposit money into another account where you receive a better rate of interest? It’s important to check how your savings are growing and at a rate above inflation. Otherwise, the money might be better used to clear debts.

Finally, there are a few key questions to ask yourself. Are you prepared for the unexpected? Do you have protection in place to cover your bills should you become ill or are made redundant?

3. REVIEW YOUR PLANS

Whether your goal is to create a nest egg for early retirement or to leave something behind for grandchildren, reviewing your plans and whether you’re on track is important.

Ask yourself these questions: How long should I be prepared to put your money away for? Do I want to invest for income, growth, or both?

Even if retirement seems a long way off, think about what you want your money to do for you when you stop working.

Again, ask yourself: Do I know how much money I may need in retirement? How long will my money need to last for? How much should I be saving today?

The earlier you start the process of planning for your retirement, the more manageable it will be, and the less of an impact it’ll have on your daily finances.

Also, it’s not uncommon now for people to have built up a number of pensions during the course of their lives.

Pension consolidation could potentially be a way to maximise the value of your investments. It can make it easier to track how well a fund is performing.

4. USE ALLOWANCES

Time is running out if you have not taken full advantage of your tax-efficient allowances before the end of the tax year on April 5. Every tax year you receive new individual savings account (Isa) and pension allowances. Questions to ask: Have I fully maximised my contribution levels for the current 2020-21 £20,000 Isa and £40,000 pension allowances?

5. WILLS AND ESTATES

Making a will is one of the most important things we can do – after all it determines how our most personal possessions and hard-earned savings will be shared among close family and friends.

It is often a simple and inexpensive process. But failure to make a will can pose major difficulties for those left behind, for instance, by paying more tax than necessary.

Your estate – money, other assets and possessions – could be distributed according to the law rather than your wishes. It is particularly important to leave instructions if you own property.

It also pays to look at other legal mechanisms you might need in later life. A power of attorney will also allow you to give someone you trust the legal power to make decisions on your behalf in case you later become unable to make decisions for yourself.

LIFE ADMIN: With many of us spending most of our time at home, now is a good time to stop procrastinating over those affairs that need tended to.