Financial Resolutions for 2018
1. Review your Finances and consider making your Lifestyle Financial Plan.
The start of the New Year is a great time to give yourself a financial health check as this allows you to gain or in some cases re-gain greater control over your finances over the next twelve months and beyond.
2. Making a new Will or Updating an existing Will.
This is an important aspect of your Lifestyle Financial Plan that is often overlooked. A Will allows you to take control over your assets and to plan how they can benefit you during your lifetime and ultimately how they can be transferred to your children and next of kin in the tax efficient way possible.
This also gives you the opportunity to evaluate whether you need to put Enduring Power Attorney, sometimes referred to as a Living Will, in place.
3. Protecting You and Your Family.
- Life Insurance.
Life Insurance provides the opportunity for you to ensure that your family’s standard of living is unaffected if you were to die. Financial issues like mortgages, weekly bills, education costs for children can all be provided for.
- Income Protection.
Income Protection provides regular (replacement) income if you are unable to work as a result of injury or illness for a long and sustained period of time.
- Specified / Serious Illness Cover.
Specified Illness Cover provides a lump sum if you suffer from one of the specified illnesses listed in your protection plan.
4. Create an Emergency Fund.
This is an agreed amount of cash that is built up and held separately from your other funds. It is designed to provide you with some fall-back position if or when a blip occurs. A blip maybe something as simple as paying the excess on a hospital bill or insurance claim, or the need to replace a boiler or to cover lost income for a few months.
5. Retirement Planning.
There are a myriad of options with varying degrees of complexity available when planning for your retirement. As such it is essential that you seek the professional advice to ensure that you choose the correct option for you.
Key points to consider for Retirement Planning
- Set a Retirement Goal – When do you intend to retire and how much income will you to need?
- Funding Gap? – Is there a gap between the income you will have and the income you will need in retirement?
- Tax relief – Maximising the tax relief on the pension contributions every year.
- Investment Strategy – Developing an Investment Strategy that is appropriate for you, i.e. one that is based on your retirement goal, risk profile and the number of years you have left to retirement will deliver the best outcome for you.
- Post Retirement Options – A number of options exist and once your Retirement Plan includes the proceeding key points then choosing the Post Retirement Option that is right for you is relatively straight forward.
6. Understanding Investment Risk and Long Term Investments.
As deposit rates continue to drift closer to 0% it is more and more difficult, without taking some risk, to get a return on your money that even beats inflation.
Cash that is held on deposit is accessible which gives us a feeling of security. We don’t tend to view the €100 in our bank accounts today as any different to the €100 that was there a year ago. However, inflation means that the €100 today doesn’t buy as most as it did a year ago and as such we have lost money in real terms.
In order to beat inflation and achieve the level of returns you need a decision on whether to invest or not needs to be made. Most important in this decision is a rigorous discussion involving your attitude to risk, your capacity to take risk and how comfortable you are with short term falls in the value of your investment also known as downside risk.
On conclusion of this discussion an appropriate Investment Strategy, based on a robust evidenced based Investment Philosophy can be developed and implemented for you to achieve the long term returns you need.
7. For PAYE – Complete a P21 Balancing Statement.
This is basically a review of your tax liability for 2017 but you can get a P21 for the last 4 years and claim a refund of overpaid tax for that period. The P21 provides you with details of your total income, tax credits, tax reliefs and PAYE tax paid for a particular tax year. To get a P21 you must send the following to your local tax office:
- Your P60 form and, if relevant, a P60 form for your spouse or civil partner for the tax year or years in question.
- Details of your claim for additional tax credits and if you are looking to claim tax relief for medical expenses, you also need to complete and submit Form Med 1.
A P21 is often used as proof of earnings to get a maintenance grant, a mortgage for a house or a loan.
Pat Matthews CFP® MSc (Fin) QFA RPA BBS is a Certified Financial Planner and the owner of Smart Finance, a Financial Planning practice based at Bawntaaffe, Monasterboice, Drogheda, Co. Louth. For more information: www.smartfinance.ie or send an email to firstname.lastname@example.org
Disclaimer: The information in this article is for informational purposes only. Smart Finance does not make representation as to accuracy, completeness, suitability, or validity of the information and will not be liable for any errors or omissions or any losses, injuries, or damages arising from its use.