5 tips to sort out your finances

Read our guide to improving your financial position. Picture: TSPL
Read our guide to improving your financial position. Picture: TSPL
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KEVIN Garfagnini, director at Mazars Financial Planning, gives his top tips on getting your finances on the right track.

1) Make a budget

Get a clear picture of your household finances by sitting down and putting together a budget showing your income and expenditure. It couldn’t be simpler, nor more effective – just write down all the money you’ve got coming in and all of your outgoings, including regular bills, mortgage/rent payments and so on. That will tell you where you stand and also help you identify where savings can be made.

2) Work out what you want

Next, work out your goals and aspirations for the future. This would include things such as when you want to retire, what you want to do in retirement and how much that will cost, eg will it require 50 per cent of current income, or perhaps even 70 per cent? Once finished, you will know where you are now, financially, and where you want to get to in the future.

3) Draw up a plan

You can now put together a financial plan to ascertain what income you would need to sustain you in these circumstances. A good starting point to help with his exercise is to look at the Savings Planner tool provided by Unbiased.co.uk. You should also take advice from a financial planner who will be able to take you through the budgeting process.

4) Don’t pay more tax than you need to

Most of us have to pay some tax on the income we earn. However, not all income is taxable and you’re only taxed on “taxable income” above a certain level. Even then, there are other reliefs and allowances that can reduce your income tax bill. For example, you can use your annual individual savings account (Isa) allowance to invest up to £11,520 in either a cash account or in stocks and shares, and you won’t pay any income tax on your interest.

5) Plan ahead

Life expectancy estimates suggest that individuals born today will live beyond 90 years of age. This may sound good, but before you start dreaming of a long retirement it’s worth considering how it will be paid for. Such expectations for our older age mean saving for retirement, is now more important than ever before – and the earlier you start, the easier it is to build the fund you need.