The road to financial well-being

MoneyPlus Features Team

Get your financial well-being on track in 2018

With the festive season here, it’s a time when many of us reflect on the past, and look forward to a new year.

It’s also the perfect time to look at your finances and take steps to make sure you’re set up for success.

Here’s our suggestions to help you get on the right track for financial well-being in 2018.

Get into the saving habit

Yes, there’s always something to spend your hard-earned cash on, but that’s where automating your saving can help. In other words, pay yourself first.

Setting up a direct debit from your current account to your savings just after you get paid and have covered all the bills means you don’t see it and you won’t miss it.

Another great exercise to undertake is to review your direct debits and see if you can cut costs.

Maybe you have a fancy gym membership you never use, or a pricey TV plan you could swap for a better value package?

Whatever it is, there will be spends you can slash.

After you’ve taken back some control, you can spend the rest of your pay as you see fit.

Where to put those extra savings?

Boost your pension

We all want a long and comfortable life after work and paying into your pension is an excellent way to help make that happen.

Every time you top up your pension you benefit from tax relief on your payments and your employer may also match your contributions. Just think of the pot you could build with your savings, tax benefits and the investment returns you could get over the years.

What’s more, your pension’s growth is virtually tax free and, when you come to spend it, you can take part of your pension as a tax-free lump sum.

When it comes to topping up your pension, remember it’s an investment. Investing even a small amount each month can quickly snowball. Say you invest £50 a month, any growth you get is added to that £50 and invested too. And the next month, any further growth on both your original amount and the interest is then also added to your investments.

The impact slowly magnifies month on month – like building a snowman – keep rolling the snowball and it gets bigger and bigger. This snowball effect is called compounding, and even starting off with small but regular payments could really boost your investments over the long term. Of course, as with any investment, there’s no guarantee that it will rise in value over time and you could get back less than you paid in.

Our pension calculator tool is a quick and easy way to find out if your retirement savings are on track.

There’s your ISA too

An ISA may be fantastic place for you to save or invest as the growth is tax-free.

There are a few different types of ISA out there. There’s the cash ISA that works like a savings account and the stocks and shares ISA that lets you put your money into different types of investments.

To find out more about the different types of ISA, take a look at our guide ‘What is an ISA’.

An ISA is usually easy to access, so it’s a great place to save if you want to access your money before age 55, when you can start to take money from your pension.

Saving even a little each month into an ISA can add up to a lot. Take a look at our ISA calculator tool to help you see how much you could save.

This tax year, the ISA allowance jumped up from £15,240 to £20,000. So it’s worth making the most of it now.

Our blog ‘Make the most of this year’s bigger £20k ISA allowance’ has more information.

The benefit of keeping ahead of the tax deadlines

Those tax deadlines seem to come around quickly and getting organised over the festive season is one way to help you take tax in your stride.

So, if you need to complete an online tax return and pay any taxes due remember it needs to be done by midnight 31 January 2018, unless HMRC has told you otherwise.

That way you won’t end up with a fine if you miss your deadline.

Each year, hundreds of thousands of people can’t find their paperwork or simply run out of time.

We’ll be publishing blogs on tax in the New Year to help you make the most of your money, including how to make the most of tax relief and making the most of this year’s tax allowances.

Take back control of your finances

We’ve talked about some of the ways you can set yourself up for success and how to make the most of the rest of this tax year.

But we understand that things happen in life and it can be easy to build up some debt, or struggle with the extra financial pressures the festive period brings.

According to The Money Charity the average total debt per household in 2017, including mortgages, was £57,490, so it’s clear that a lot more of us have money worries than you may think.

Head of Sustainability at Standard Life, Sandy MacDonald explains: “Different circumstances in your life can lead to getting into debt. You can be earning well, and paying all your bills on time, but something like the breakdown of a relationship can throw you off course.

“The important thing is that you don’t feel ashamed or alone. It really can happen to anyone. Take steps as soon as you can to get the help you need, and get back on track.”

If you’re struggling with debt, Citizens Advice has a whole host of information to help you get on top of it. Take a look at their Debt and Money page.

To help you make the most of your money, take a look at the Savings section of our Money Plus Blog where you can find simple tools and techniques to use.

Money might not buy you happiness, but knowing it’s in a good place can bring you peace of mind.

Have a great festive season and may there be a lot to look forward to.

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A stocks and shares ISA and a personal pension are investments and their value can go up or down and may be worth less than you paid in. Laws and tax rules may change in the future.

The information here is based on our understanding in December 2017. Your individual circumstances also have an impact on tax treatment.