If you were ever a Girl Guide or Boy Scout, you will be familiar with the motto, Be Prepared. In this article, we look at the importance of getting ready for 2022 and being prepared for any eventuality where your finances are concerned.
Look at your previous year’s spending
One of the best ways to prepare for the year ahead, is to look back over the one that has just gone. Spend some time reviewing the previous twelve months and analysing what you spent your money on. Are there any surprises? It may be that when you look at the whole year, you discover that you are spending more than you earn.
Take the time to do a money-makeover. It can take a few hours but when you consider that this could save you thousands of pounds, it is time well spent. Put aside a day to check all your bills systematically:
- Home phone and broadband
- Council tax
Make sure you are getting the best deal on them all. View it as exploring how you can get the same thing for less, rather than cutting-back. That way, it will feel like pain-free saving.
Switching gas and electricity providers would usually be an obvious step to take, but due to the energy crisis this is not recommended at the moment, as it is difficult to make any savings and it could even cost you more.
Consider any other areas where you could save money, such as car insurance, home insurance, credit cards, digital TV, gym memberships and childcare. Look at your direct debits carefully. Do you need them all?
What are your goals?
Once you’ve reviewed last year’s finances, consider what you would really like to accomplish this year. What would you be disappointed not to have ticked off your list by this time next year?
Take time to stop and consider what your true goals are. It is easy to get caught up in the busyness of everyday life, with the pressures of work and family, without thinking long-term about what you want to achieve.
Set yourself clear, financial targets. Visualise what you are aiming for: a new car, a new home or a dream holiday. As a result, rather than just saving vaguely for the future, you are linking it to something tangible.
Drawing your pension can seem a long time off but it is helpful to understand the effect your decisions today will have further down the line.
If, for example, you managed to cut your household bills by £73 a month that would equate to nearly £900 a year. Rather than spending that £900, if you saved it into a pension and watched it grow at five per cent for 40 years, it could mean you would retire with an extra £6,336, thanks to compound interest. Suddenly, your long-term goals would seem more attainable.
Interestingly, research found that if people were shown a picture of how they would look when older, it encouraged them to plan for their retirement.
Key dates to remember
Another way of being prepared financially for the coming year is to be aware of key deadlines. This ensures you can take the necessary steps in good time and avoid any last minute panics.
- 31 Jan 2022 is the deadline for submitting your self-assessment tax return if you are self-employed. Try not to be one of the 2,700 people who filed their tax return on Christmas Day in 2020!
- 5 April 2022 is the end of the tax year so make sure you have maximised all your allowances before this point, such as your ISAs, and topped up any pension contributions if appropriate.
Now you are all set to for 2022 with your finances in order.