Technically, the United Kingdomis now out of recession. But every family will tell you that times remain tough. Even at the top end of the pay scale, the ending of child allowance early in 2013 will mean that a lot of people have far less disposable income.
With no sign of the economic good times returning in the foreseeable future, saving money is going be more important than ever in 2013 - both saving money now, and long-term savings for the future. We've put together ten financial planning tips to help you do that.
1. Make use of your tax free allowances. Everyone over the age of 16 has an allowance for an ISA (Individual Savings Account). For the tax year 2012/2013 this is £11,280 of which £5,640 can be saved in a cash ISA (with those aged 16-17 only being eligible for a cash ISA). If you have money in the building society it makes sense to use your ISA allowance every year as there'll be no tax deducted from your interest. Remember though, that the limit for this tax year only runs until 5th April 2013. After that a new tax year starts, and if you haven't used your 2012/2013 allowance then it is lost.
2. Don't neglect your other allowances as well. Everyone has a Capital Gains Tax annual exemption (£10,600 for the current tax year) but accountants will tell you that it is not used to shelter gains as often as it should be.
3. Although pensions have slightly fallen out of favour in recent years they remain a very tax efficient way of saving for your retirement, as you receive tax relief on the contributions you make. Many people are unsure of their pension benefits and/or the current value of their pension savings. Talking to an independent financial adviser and having a thorough review of your pension planning should be a New Year priority for many people.
4. Check on your mortgage and life cover. Making sure that you have the most competitive rate on your mortgage and that you're not paying too much for your life cover and other protection policies can be an excellent way to make some short term savings in your monthly expenditure.
5. As well as making sure that you're using your ISA allowances, you should also check on the rates you are receiving on your savings. Even though interest rates are generally low there is a still a big difference between the best and worst accounts. This is an area where a little shopping around or research online can pay big dividends.
6. Many children will be going on to further education, and with the new student loans scheme now in operation it makes sense to start saving as early as possible for the cost of university or college. With fees of up to £9,000 plus the cost of accommodation, many students are going to finish a three year course with debts approaching £50,000. With interest payable on this debt, many parents will feel that they don't want their son or daughter to start working life with such a burden of debt, and will want to try and offset it in some way. The earlier you start saving the better.
7. Get rid of high cost debt. If you have debt - whether it is on credit cards or loans - then it makes sense to try and pay off the debt with the highest interest rate first. There are some attractive deals available on switching your credit card and taking action in this area can lead to significant monthly savings.
8. Although this isn't an area we advise on, many of our clients have made considerable savings by checking how much they're paying for gas and electricity. In some cases switching to a new provider can mean sizeable monthly savings, especially with costs of lighting, heating and power continuing to increase.
9. Clean up your credit file. It costs very little to obtain a copy of your credit file from Experian, and making sure that it's an accurate reflection of your credit history is something well worth doing. Improving your credit rating could well mean that your future cost of credit is reduced, leading to long term savings.
10. Lastly, a piece of psychological advice! You're almost certain to be more successful with saving if you're saving for a definite purpose. Set money aside for your 'holiday inBarbados' or to 'change the car.' Apparently money that's vaguely there 'for a rainy day' is all too readily accessed…
The economic climate is going to remain difficult, so saving money in the short term and building up your savings for the future are going to be more important than ever. As always, if you'd like any advice on your savings or you'd like to discuss specific savings objectives, then please don't hesitate to contact us.