Set your financial goals for the year ahead

Here are some simple financial objectives, which will help boost your savings.

1. Get the taxman off your back

Nearly seven out of 10 Britons do nothing at all to reduce the amount of tax they pay and as a result they pay £4.6 billion in tax unnecessarily. There are plenty of things that you can do, such as making full use of your family’s tax-free ISA allowances, and seeking capital gains tax and inheritance tax advice, that will leave you more of your money to spend on the things you enjoy.

2. Work out what you need to retire in comfort

Just because you’ve got a good income now, doesn’t mean you will be well off in retirement.  A single man with a £100,000 pension pot would be able to buy an annual income of just £5,500 a year. That’s not a lot of luxury.  If he had £200,000, he would generate income twice that amount, or £11,000 a year. To get the equivalent of the national average salary in retirement, which is currently £26,500, you would need a pension pot of around £500,000.

3. Claim pension tax relief

Pension tax relief is hugely valuable, especially for higher earners. They can get tax relief of up to 45 per cent on their pension contributions, but there is no guarantee this will continue. There is a growing political campaign to cut pensions tax relief for higher earners. Your contributions are subject to an annual allowance of £50,000, falling to £40,000 in 2014/15. Use it if you can. You may also be able to carry forward any unused allowance from the past three years.

4. Review your risk profile

Look at where your money is invested. Does it match your risk profile as you get closer to retirement? The closer you get to retirement, the fewer chances you should take with your money. You might want to reduce your exposure to, say, high-risk emerging markets, and shares and switch your gains into cash or bonds.  Consider taking specialist financial advice.

5. Review your mortgage

The average mortgage rate recently hit an all-time low of 3.47 per cent (January 2019) . If you’ve got equity in your property, you can find deals for as little as 2 per cent or 3 per cent. If you’re paying more than that, it’s time to shop around for a better deal.

6. Think of your kids

If you invested just £84 a month for 18 years, you could build a lump sum of £25,000 for your children’s future. Even £50 a month over the same period could build a fund worth nearly £15,000, which would make a decent contribution to a house deposit. And you can invest a lot more than that, without having to pay tax on the growth or income.

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