Jill Kerby

IT MAY BE MODEST BUT DON’T WASTE YOUR BUDGET WINDFALL

It would appear that the ‘squeezed middle’ may be a little better off in 2019, due to the Finance Minister’s modest adjustment to USC, income tax and DIRT reduction or the small changes to welfare payments. On balance, Budget 2019 is going to see most workers better, not worse off.

What you want to avoid is the temptation to say, ‘ah sure, it’s such a puny amount that it hardly makes any difference’ and just let your small windfall get swallowed up in everyday spending.  If that’s your first inclination you might be the idea candidate for a professional personal finance review – more on that later.

If you’re already someone who is keen to utilise any extra cashflow in the most positive way, then why not think of your Budget windfall (or tax refund for all the extra cash taken from at least five of the post 2008 budgets) as another opportunity to build on those positive personal finance habits. Here are some practical priorities to consider:

-       If you have any expensive debt – like a 20% credit card balance and you are not already paying it off every month but are only paying the minimum required payment (usually 5%), here’s a chance to whittle away faster at that debt. The Competition and Consumer Protection Commission (ccpc.ie) has a useful debt calculator that will show you just how much interest you can save by paying off your credit card sooner than later.

-       Ditto for accelerating a mortgage payment.  We pay at least twice the rate of mortgage interest than other EU borrowers. Putting another few hundred euro a year against the outstanding capital – ideally on a weekly, let alone monthly basis if your lender will permit more frequent payments – will also save a significant amount of future interest and reduce the term of your loan. Again, check how much you will save by keying in your repayment details into the mortgage calculators on the ccpc.ie website.

-       Even if you already have one, open a new savings account into which you automatically direct your monthly Budget windfall for a specific purpose.  Young families may want to open a ‘back to school’ account that can help pay for books and uniforms or the not-so-voluntary’ contribution.  Sports club fees/uniforms might be paid a bit more painlessly if that’s what you need to save for. For many, any money you put aside for a holiday or Christmas may help reduce the shock of your January credit card bill.

-       If you can afford to, and you don’t have as many pressing debts to pay down perhaps this 10th year after the great economic downturn began is the year you can ‘pay yourself first’ again by building up a household contingency fund again - every household should aim to have at least three months of net spending set aside to meet emergencies. 

-       Or maybe this is the year that you can afford to use the Budget refund to rejoin a sports club, gym, class or hobby interest that had to be abandoned when times were particularly tough. It might be enough – over the year - to buy a pushbike and helmet that will help improve your fitness and cut back on transport costs or in the case of older people, to go towards a taxi account.  The point is that this money is now properly budgeted and allocated.

Which brings me back to people who scoff at the modest Budget windfalls of recent years.  2019 – again - is is an opportunity to take the financial bull by the horns and get it under control by hiring an independent financial planner (one who is not commission-remunerated) to give you a proper financial review.

Regular readers will know that one of the most common queries this column receives is from people who are looking for an independent, impartial financial adviser who will hopefully earn their trust and ideally becoming a life-long family adviser, just like their GP, family solicitor or insurance agent. 

I recently addressed the annual conference of the Society of Financial Planners of Ireland about my decades-long view that nearly every financial scandal in this country – from the misselling of expensive endowment mortgages and whole of life insurance policies, one-size-fits-all pensions, payment protection cover and the property crash – finds its way back to commission rewards and a lack of independent advice.

There are now over 620 qualified (to third level international training standards) Irish certified financial planners. Not all of them work in independent practices – those employed by banks, life companies, stockbrokers cannot give truly impartial advice. Not all are exclusively fee-based – you’ll need to ask - and won’t be until commission sales are finally outlawed.

Even so, check out the interactive map of members at www.sfpi.ie.  And put your Budget refund towards where it will make a real difference:  a proper, fee paid, professional financial review.

Letters to jill@jillkerby.ie  The TAB Guide to Money Pensions & Tax 2018 is available in all good bookstores. See www.tab.ie for ebook edition.)