As we all reflect on the year gone by and look forward to the challenges that await us, it’s only natural to consider what we can do better. If you’re ethically minded, and you’re already making some eco- friendly choices in your life, you’ll probably be considering how you can expand your positive choices even further.
Beyond your diet, your travel habits, and your plastic free lifestyle, what you do with your finances is the most powerful thing you can do to help protect the planet. But, caring about the planet doesn’t mean you have to accept substandard financial wellbeing.
Here are three financial New Years Resolutions that will help you take control of your finances in 2022
1. Embrace honesty & look at a budget
Confronting your true financial situation is key to managing it. You can easily convince yourself everything’s great when you’re sliding into debt, and likewise you could be missing great opportunities to save or invest your money.
Put two hours aside, get comfy on the sofa and write your monthly budget. If you’re familiar with Excel you might want to set up a spreadsheet, or you could go old school with a pen and paper, but start by writing down your income. Then, look at your essential monthly outgoings; rent or mortgage payments, utilities, debt repayments, mobile phone bill. Add these to your budget.
Next, look at your other direct debits. It’s easy to sign up to things and forget them, not realising they’re still coming out of your account. Or, you may know you don’t want these services, but you haven’t had time to cancel them.
Scroll through your banking apps and notice what regular payments are coming out of your account. Netflix, gym membership, Deliveroo, Spotify… the list is likely to be long. Now you can see them in black and white, ask yourself: which of these are essential? Do you use them? Do you want to keep paying for them?
Once you’ve made your decisions, go through your bank account and cancel the relevant direct debits. Add the essential ones to your budget.
When you’re happy with your outgoings you can calculate how much extra you have left over each month. You can mindfully decide how to use that money. Would you like to add to your emergency fund or invest for the mid to long term? Could you add a monthly donation to a charity, do you have a special purchase or holiday in mind, or do you need to increase your debt repayments? However you manage your extra money, you’ll have a firm grip on your finances… Not bad for a couple of hours on the sofa!
What you do with your finances is the most powerful thing you can do to help protect the planet.. up to 21 x more powerful!”
2. Get protected
If you have a mortgage, you will probably have insurance cover for the outstanding amount of the mortgage, as per the conditions of the lender. However, in the sad event of your death or illness, your family will need further financial support. Insuring yourself for life protection and/ or critical illness protection means you can feel confident that no matter what happens, financial worry won’t be something your family have to think about. If you have a partner or spouse, this is something you can discuss together. You’ll be able to decide the cover amount, and who will be the beneficiary of the policy, including setting up trusts for your children.
Mutual companies do not have shareholders and are owned by their members. They are therefore more incentivised to make decisions to benefit their members. They are also have a much higher probability of paying claims. We work with every mutual provider to ensure our clients have access to the most appropriate cover.
3. Plan for the future
This is a broad resolution, but it is important to consider saving towards your future now. When it comes to pensions the UK is on the brink of a crisis.
“There is a big gap between what we need and what we have.
Getting a grip of your pension contributions cannot happen too soon.”
According to consumer group Which?, Someone who wants a “comfortable” retirement would need at least £19,000 per year or £26,000 for a couple. This increases to £31,000 every year or £41,000 for a two-person household that wishes to live a more luxurious lifestyle
Unfortunately, the average pension stands at just £61,897, which will produce just £3,000 per year.
There are numerous reasons for this, including having multiple financial pressures, the effect of the COVID pandemic, and misinformation about how much a pension pot should be to maintain a decent standard of living.
Regardless of your current age, getting a grip of your pension contributions cannot happen too soon. Often people plan to deal with it “tomorrow”, or trust that their monthly contribution via their employer will be enough. Doing some research into your idea pension amount is a good place to start, and there are pension calculators you can use to work out how much you need to save. Investing in a separate pension or increasing your pension contributions is a great way to start the new year.
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Jai is the founder and lead ethical financial adviser at Mindful Wealth. Based in the South east, using the latest in video communications (or a good old fashioned phone call!) he helps people throughout the UK manage their money ethically. He was trained by LIBF and is part of the New Leaf Network, the UK’s only truly independent financial services network. Jai passionately believes in making your money work for you.
Everything written here is intended as a guide, to inform and educate, and to generate discussion. It absolutely is not to be used in place of specific and personalised advice from a qualified financial adviser.