New Year’s Resolutions –
how to give your finances a thorough health check this January
It’s still January but I wonder how many of us made and stuck to our New Year’s resolutions.
Instead of committing yourself to some elaborate resolution, which may be all but impossible to keep, why not think about taking some small steps to put your finances in better shape?
Little steps, which are not too overwhelming, can deliver significant financial rewards, so keep the below in mind as you step into 2023.
Review your mortgage
At a time of rising interest rates, it makes more sense than ever to think about switching your mortgage. All homeowners with a mortgage outstanding need to take some time to review their options.
Switching – even if it’s only to a new rate with your own mortgage provider – can offer significant savings.
Take someone with an outstanding mortgage of €250,000 over 25 years at a current rate of 4 per cent. Repayments are €1,319.59 at present. By switching to a fixed rate of 3.5 per cent, repayments drop to €1,251.68 a month, yielding total savings of about €20,409 (assuming both rates stay the same over the full 25-year period).
This may now apply also to those on tracker mortgages. Once untouchable, the recent sharp rise in interest rates means you should seek advice as you may now be paying over the odds if you’re on a tracker.
And, if you are locked into a decent rate, you could consider overpaying your mortgage on a monthly basis, a move which will both cut the term of your loan and save you loads more money in the process. Remember, doing this doesn’t have to be permanent and some banks may allow this even if you’re on a fixed rate, so if you’re feeling too stretched each month, you can revert to your regular payment.
Get ready to move savings
Given those hikes in interest rates, it must surely be only a matter of time – right – before interest rates on deposits start to increase.
Interest rates on savings are abysmal but they are starting to move. So, it may make sense to get advice on maybe holding back on committing your funds to long-term savings products in the short term, as rates should start to rise. Shop around before you make your decision for the best rate.
Get a grip on a pension
Rather than get overwhelmed by all things pension-related, why not take a few simple steps this January. First, make sure you’re not leaving any money on the table by checking what is the maximum contribution your employer will make and seeing if you can afford to get this by making a matching contribution.
Secondly, consider whether or not you can afford to increase your contributions to your pension via additional voluntary contributions (AVCs), and whether or not you want to as part of your long-term financial planning goals.
Thirdly, check what you’re invested in. You should talk to an adviser to ensure your investments match your attitude to risk at the very least.
Reduce my debt
If you have personal debt outstanding, it will likely make good financial sense to concentrate on this, particularly while waiting for deposit rates to rise to give you a decent return on your savings.
The advantages of clearing personal debt are significant; you will be able to borrow more if you’re looking for a mortgage; you won’t have monthly repayments stealing your ability to invest, improves your quality of life, etc., plus you won’t have the worry of knowing you’re carrying debt.
If you have a personal loan, doing the sums on what you can afford to over-pay mean that you can cut the term of the loan – and save money.