How to tackle 3 common New Year’s financial resolutions

Over half of people over 45 say they don’t set a new year’s resolution.

We think everyone should have a financial resolution. Small changes today could make all the difference to your future, you’ll thank yourself later.

Instead of telling you what to do, we explore three common goals for people at different stages of their saving and investing journey. And we explain how you can make them work for you too.

1. A new saver’s starting point – clear debts, then build savings, then invest

The fourth most popular New Year’s resolution is to save more money.

It’s a great goal, but don’t stuff that cash under your mattress. How you save is important. For example, small debts like overdrafts can carry hefty fees and interest rates. It’s usually a good idea to pay these off before building your cash pot.

When you’re in a position to start saving, you’ll want to start on an emergency fund. An emergency fund should be in cash savings you can access easily. It’s there to cover unexpected costs like a broken boiler or car repairs or a short-term loss of income. Three to six months’ worth of essential expenses is usually a good place to start, but you might want more depending on your circumstances. If you’re in or close to retirement, it’s usually best to have closer to 1-3 years’ worth of expenses.

Once your high-interest debts are paid and you have rainy day savings to fall back on, think about dividing your money into pots.

Expert financial adviser Bradley Clark suggests a Goldilocks approach to saving in the form of short, medium and long-term goals with pots to go alongside them.

The three pots rule – how to use it to help you reach your financial goals

2. Make your long-term savings work harder

How often have you heard “if you just gave up your daily coffee you’ll have…”? But having financial stability and resilience doesn’t always mean giving up on the things you love.

If you know that your morning coffee usually costs £2.50 per day, set up a monthly  standing order to a  savings account that matches the amount.

Think about investing that money for the  long-term (5 years or more)  in something  like a Stocks and Shares ISA or a pension.  

When you invest, you need to be comfortable with the value of your investments going down, as well as up. Unlike cash, you could get back less than you started with.

How to get started with investing

You could even round up the amount to the nearest pound to find yourself putting away almost £1,000 a year. What a great way to start the day.

3. Make better investment decisions

Spreading your money, diversifying, is one of the most important things when investing. Lots of us know we should do it, but how do you know you’re diverse enough?

Start by checking you have the right mix of investments in your portfolio. Spreading your money across different assets and markets.

Here’s a checklist to help you make sure you’re on the right track. Check:

• The types of investments you own – do you own some shares and bonds?
• The variety of sectors you own, like technology or retail
• The countries or regions you’re investing across

If you’re already an HL client you can use the  Portfolio Analysis tool to review your investments. It will show you a snapshot of your portfolio, so you can see where you stand and identify potential changes. 

Not sure where to start? Find out more about advice

Making your New Year’s financial resolution stick

No matter your goal, the most powerful tool at your disposal is a financial plan. It can be hard knowing where to start, and it might take a bit of time if you’ve never done one before.

Start by making a note of your short, medium and long-term financial goals. From here you’ll be able to work out how much you need to be saving and budgeting for.  

If you’re not sure how to get started, or your plan hasn’t been working for you, see if our financial advisers can help.