The following is an article from Worldwide Financial Planning, written by Peter McGahan.


 

A friend and I decided after a ‘few’ drinks to do seven marathons over a short period of time to raise money for charities.

One of the greatest pieces of advice came from the sports psychologist at the London Olympics at the time who told us to think long and hard about our ‘why’ behind the reason for doing them.

‘When you come face to face with pain, torment and doubt, you will need the answer, that ace card which tells your subconscious that this is a really good idea’.

New year’s resolutions are just the same. Giving up pickled onions, cakes or artichokes might be something you’d like to do, but if there is no driving ‘why’, it falls into the subconscious as nothing more than a wish or fuzzy dream.

Stopping smoking so your grandchildren can see your smile at their wedding is a bit more engaging and likely to happen, especially if you can visualise that amazing smile back.

Up to our ears in brussel sprouts and indigestion tablets, financial resolutions are as appetising an idea as cardboard chewing. They are, however, a great idea.

If you use credit cards, try and pay them off immediately. Credit cards have become increasingly easy to swipe as you jog by, with the average spend per month hitting its highest level since FICO’s records began. Added to this is the average credit card charge rate hitting a two decade high of 21.49 per cent. This was with bank base rate at 0.1 per cent.

The lowest card rate today is 9.9 per cent, so consider a swap if the obvious options aren’t available.

Consider consolidating onto your mortgage. Don’t worry about the length of time of the loan as you can overpay using the interest you are saving.

One of the better fixed rate mortgages today is at a rate of 1.24 per cent. If you added £10,000 to repay a credit card debt at 21.49 per cent (the cost in just interest is £2,149 or £179 per month, so you have no chance of repaying the capital), the saving by adding it to the mortgage is £2,025 per year in interest as the interest cost is just £124 per year or £10 per month.

In well under five years the original debt would have been repaid in full using the interest saving alone. Don’t have a home? The best personal loan rate is around 2.8 per cent based on suitability. So, get a grip of all your expensive debt for good.

When you spend, buy things which are sustainable and will last rather than having to keep replacing regularly. (My best tip)

Replace your view of money by that of time. It’s a great strategy for 2022. Look at what you really value, i.e. time with your children, golf, holidays and so on. Consider that each spend is ‘x’ hours of work to replenish that, and that is ‘x’ hours not doing what you really value.

I’ve mentioned this before but don’t compare yourself to others. The world is a stage and you don’t know what people really have let alone what they are going through. It’s also not a happy place and an expensive one too, as we try to compete financially and can never win.

Create an emergency fund of savings and don’t mix up ‘cashflow’ with the need to repay mortgages. If you have £10,000 set aside, that is a lot of mortgage payments if things go wrong, but if you have paid that off the mortgage, you have no cashflow and could fall into arrears and it’s a downhill battle.

Make a will. There is nothing worse than dealing with an estate where there is no will. Aside from the confusion, quarrels and in-fighting, is the grieving family dealing with banks who won’t give you any information, added to the inevitable legal costs that will apply.

Finally, do a full refresh of your financial plans if you have not looked at them in the last two years. Product costs and competitiveness are vast with some pension funds having given nearly 10 times the return per week than others.

If you don’t use an independent financial adviser, please do.

Peter McGahan is the Chief Executive Officer of Independent Financial Adviser Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority. If you have a financial question please call 01872 222422 or email info@wwfp.net or visit us on www.wwfp.net