Money Times - January 2, 2018

Posted by Jill Kerby on January 02 2018 @ 09:00

Instead of a New Year’s resolution – Make small changes every month permanent


Are New Year resolutions for the hopelessly optimistic?  Diet clubs and gyms certainly hope so with new membership numbers soaring in January and February only to trail away a few weeks later.

That said, a grey Sunday afternoon in January at the kitchen table with a big pot of tea is the perfect time to face up to those red hot credit card bills that have just arrived in the post and to do something about improving your 2018 money habits. in 2018.

The secret to improving your personal finances – like dieting - is to make small changes, permanent. You do something positive. Then you do it again and again until it becomes a habit, just part of your usual routine.

For example, instead of using the credit card, you put it in a drawer to be used in emergencies only. Instead, you use the debit card or cash, both of which reduces the risk of overspending and doesn’t carry a 20% plus annual interest charge.  The tempting but expensive Visa or Mastercard is now out-of-sight, out-of-mind. Ideally, you cut up the card and avoid the €30 annual stamp fee duty as well.

Last year was, and 2018 will probably continue to be a tough year for anyone grappling with the on-going housing crisis. There isn’t much sign of wage growth to keep up with soaring rents and house prices, though it does look like there will be more supply of property and that the terrible tracker scandal could be coming to an end. 

Each of these financial ‘wellness’ suggestions for 2018 are realistic and practical so tick off as many as you can. They’re also time consuming, so don’t try to do them all at once. But put them all in place and a lifetime of good money and spending habits will be properly bedded down by next January. 

January:  Get the bad news out of the way. Pay off the Christmas debts right away so they don’t act as a drag on the rest of your year’s new spending. If you don’t have sufficient income or savings to clear the credit card bills, make an appointment at the Credit Union or bank (the latter probably on-line) and take out a small personal loan to clear the balance. Then cut up the credit card. It’s a plastic millstone round your neck. (Ditto for even more expensive store cards.)

Now sit down at the kitchen table (with your partner if you have one) and all your financial statements, contracts, weekly grocery and utility bills and work out exactly how much you earn and spend. Cut down on store bought coffee, buns, cigarettes, that extra pint or bottle of wine, takeaways. By cutting your discretionary spending you can now tackle your essential spending.

February:  This is the month you (and your partner) assign another afternoon to shopping around for better prices or tariffs for your other financial commitment you have: electricity, gas, broadband, mobile providers; motor, home, health, travel and pet insurance. Make a note of any contract maturity dates.  On-line comparison web-sites (like Bonkers.ie) or specialist insurance brokers can do much of the work for you. 

March:  You’ve sorted out the bigger ticket utility and insurance commitments and should see some substantial savings which, from this month can be put to good use in setting up a contingency fund or other regular savings accounts to pay for holidays, school costs or college fees, a new car, home renovations, etc. 

This is the month to start looking for an experienced independent, impartial financial adviser or planner. From January 1, under the Mifid 2 Directive, only fee-based financial advisers can call themselves “independent”, that is, give advice unrelated to any commission remuneration from product manufacturers. Once you find this person they will hopefully become a lifetime adviser just like your paid family doctor, lawyer, accountant, mechanic, handyman.  

April:  The meeting with your independent adviser should be the culmination of your months of effort to bring your finances under control and set up good money habits.  Bring your new budget and schedule of contracts, wage and bank statements along. The review should be comprehensive and the adviser will hopefully prepare a realistic financial plan for immediate and long term wealth creation and retirement provision, based on what you want and can achieve, and not on any financial product that would pay them a hefty sales commission. Expect plenty more meetings over the years as your life circumstances evolve. 

May: It’s nearly the summer. Your good money habits are now in place, but don’t forget to make a realistic holiday budget. Take the time to shop around for everything from the cost of getting to the airport to the flights, accommodation, car rental, food, drink, entertainment, travel insurance and souvenirs.

Then enjoy your guilt-free, well-deserved holiday. Your finances are on track…finally.

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