The New Year is usually matched by new financial goals, re-invigorated endeavour in monetary activities and an altogether new set of aims that are hoped to be met by the end of the year.
But what courses of action should you look at doing going into 2014, and what things are worth bearing in mind when planning ahead? Below are some key tips to consider when creating your goals for next year, with a pro-active attitude with your personal debt, mortgage and savings all advisable to ensure financial stability moving forward in the future.
Tackle your debt head on
The country’s current collective personal debt levels are estimated to be over £1 trillion, indicating that a lot of work needs to be done by banks, the government and people alike to ensure they are prepared for when interest rates rise.
Tackling your debt head on and looking to clear your outstanding balances should be considered essential going into the New Year, as you will have to ensure these are kept at a low before you can begin a meaningful savings program.
Even if you do not have a high level of disposable income, there are a number of small steps you can take in order to tackle your debt head on, and these would be extremely beneficial for your financial standing in the long term.
Starting up a direct debit scheme on your loan repayments would be a sure fire way of ensuring at least you allocate a small portion of your income towards it, and you can decide how much this is to make the process more flexible.
If you are currently someone who has a loan with a relatively high interest rate, then make sure you do not just pay the minimum monthly payment because your balance will still steadily rise due to interest charges being applied to your account.
As much you can, avoid taking out any further credit lines, and avoid taking money out of a cash machine because this can incur higher charges as well. If you do have to use credit, make sure you do not go higher than 20% of your total agreed limit as this will hopefully reduce reliance on credit and leave you with less debt to address in the future.
If you have high interest loans that are mounting up, using a 0% balance transfer card could ensure that you gain the time to gather money to make meaningful monthly repayments. There are many introductory offers being dished out by banks at the moment and might be well suited to you if your debt sizes are soaring each month through interest charges.
Make movements with your mortgage
Even though an interest rate rise from the Bank of England is severely unlikely in 2014, it is inevitable that it will happen in the next three years, and as such those who have acquired mortgages with low interest rates in recent times will be faced with significantly higher monthly repayments when it does eventually happen.
As such, planning your finances in advance now should be regarded as essential, and as much as you can set aside in savings is advisable because you will have a less shaky transition to higher payments in the future.
Overpaying if you have the finances to do so will mean you have less secured debt to pay interest on in the future, whilst considering a switch to a long term fixed deal might give you enough time to improve your income and financial situation for the interest rise. The base rate in the country is currently a historic low of 0.5%, so those on STV deals should capitalise on this and try and overpay whilst it is still viable to do so.
This is a view shared by David Hollingworth of London & Country, who argued: ‘You should be looking to get a better deal even if you are not moving because you may not have looked at the mortgage in a while. Mortgage rates are so low you could be making a saving and preparing for when the base rate climbs.’
Set up your savings
2013 has been a torrid time for UK savers, who have suffered significantly low interest rate offerings on savings accounts due to banks enjoying alternate funding via the Bank of England’s Funding for Lending Scheme. This has meant that they no longer felt the need to offer attractive saving deals because the money was no longer needed, but with bank governor Mark Carney announcing the end of mortgage funding via the scheme, saving offerings are set to bolstered going forward into the new year.
Furthermore, it was announced earlier this month that inflation had again fallen to 2.1%, meaning that the value of your savings has risen as well.
If you are apprehensive about committing to a long term fixed savings deal, then it might be worth looking at an ISA, where the allowance has doubled to £11,880 next year.
Being able to have a meaningful savings plan is dependent on not having too high levels of creditor debt, so make sure you get this down to a low before allocating your valuable funds into savings.