The end of the tax year — a fresh start for your finances

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How many of us started out with good intentions with new year’s resolutions on 1 January, only to have them fall by the wayside soon afterwards?

And how many of those resolutions focused on putting extra money away, investing our cash, or setting funds aside for our children?

The good news, when it comes to finances, there’s still a chance to start afresh.

You get your ‘do over’ on 6 April. And if you’re able to make good use of your savings allowances, then there’s plenty to think about as this date approaches.

What happens in April?

On this date, all finance-related clocks are reset: everyone has a blank slate when it comes to their savings, for example —

  • You have a new £20,000 ISA allowance
  • A £40,000 pension allowance — if you meet the criteria
  • £4,368 for each of your kids in their Junior ISAs

However, while savings are invaluable for financial security, funding our retirement lifestyle, looking after our families, and even providing a safety net in case of an emergency, recent Office for National Statistics figures tell us the household UK savings ratio — the percentage of disposable income people save — hit an all-time low in the last quarter of 2017 at less than 2%.

So for many of us to fund the lifestyle we want to live now, and in the future, it’s not a question of using all of these allowances, but rather which ones we should use, how much we should invest, and in what order?

The way forward

Simply put, without a big picture goal in mind for your well-intentioned savings, even the most diligent saver can lose focus, or end up splurging and being back at square one.

And there’s certainly no shortage of general savings advice out there, both on and offline.

For example, Massachusetts senator Elizabeth Warren’s 50/30/20 rule from the 2006 book All Your Worth: The Ultimate Lifetime Money Plan, says people can achieve financial stability by spending 50% of their after-tax monthly income on things they need, like mortgage or rent, childcare and groceries; 30% on things they want like dining out and travel; and 20% on building savings and paying debt.

However, everyone’s financial situation and aspirations are unique.

So, while of saving something is better than nothing, how much you put away to reach your goals depends on things like your stage in life, your priorities, and how much disposable income you have.

Plus, once you’ve decided on the amount you can realistically save, what will you do with it, where — or in what — will you invest it? Your bank account? Your pension or ISA? How will your investment priorities change as time goes on?

Coming up with a long-term plan that’s achievable and realistic certainly requires a significant amount of forward planning.

And that’s where a good financial planner comes in.

They can help you make those plans, stick to your savings resolutions and keep you in touch with your “why” when you need reminding.

Having proper, well-timed support and encouragement, from someone who understands you well, is key to fulfilling your financial resolutions.

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