When 2013 started there were real fears from some that the UK could slip back into recession. As the year ends the outlook is much more optimistic, with the Chancellor confirming increased expectations for growth in his recent Autumn Statement. In America the Federal Reserve has just released an encouraging assessment of the US economy, and there seems to be reasonable grounds for believing the world economy will continue to recover, albeit slowly, as we enter 2014.
That said, most people remain cautious – and it seems likely that 2014 will be a year when we look to make savings and look to save on a regular basis, just in case the problems of the last few years re-surface. With that in mind, we’ve come up with 10 Savings Tips for 2014 which we hope will help you achieve your savings goals.
- Make a commitment to save. Far too many people spend first and then save what’s left: which all too often is very little. Decide how much you want to save on a regular basis and set that aside before you start spending: once you’ve mastered the psychology of this saving becomes much easier – and much more successful.
- 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 2013/2014 this is £11,520 of which £5,760 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 2014. After that a new tax year starts the allowance for 2013/2014 is lost if it hasn’t been used.
- Don’t neglect your other allowances as well. Everyone has a Capital Gains Tax annual exemption (£10,900 for the current tax year) but accountants will tell you that it is not used to shelter gains as often as it should be. It’s also important to remember that a husband and wife both have an allowance – making a total of £21,800 for the current tax year.
- Don’t forget your pension. 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 through review of your pension planning should be a New Year priority for many people. There’s no doubt at all that if you want a prosperous retirement then it will be up to you to provide it as the Government have made it very clear that the responsibility will rest with the individual, not with the state.
- Check what you’re paying for your mortgage and life cover. 2014 could well be the year in which interest rates finally start to rise and 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.
- Check the interest rate on your savings. 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.
- Plan for further education. Many children will be going on to further education and, with the new student loans scheme coming into operation for those students who started further education in 2012, 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.
- Get rid of high cost debt. 2013 has been the year when the high cost of debt has really come to prominence, with attention particularly focusing on “pay day lenders.” 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.
- Don’t spend too much on utilities. 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 utilities such as gas, electricity and the cost of home broadband. In some cases switching to a new provider can mean sizeable monthly savings, especially with costs of light, heat and power continuing to increase.
- 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.
Despite the improving economic outlook it is likely that employers will see little scope for significant wage rises in the immediate future, the cost of Auto Enrolment being a major factor. For most of us, making savings and saving money will continue to be crucial in ‘balancing the books.’ We’re always happy to discuss any aspect of your financial planning and 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.