Year in review and a forwards look to resolutions

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Christmas and the end of the year are fast approaching and 2024 has been a busy one for personal finance, including the contents of UK Budget on 30 October, followed by the Scottish Budget on the fourth of this month

Analysing the Holyrood statement on 4 December, Euan Fernie, partner at MHA in Edinburgh, says: “At times, this Budget felt like a case of being blinded by figures with the finance secretary flitting back and forth between savings and absolutes.”

Against the backdrop of the UK Budget allocating an additional £1.5 billion for Scotland in the current financial year, and an extra £3.4bn in 2025/26, Holyrood finance secretary, Shona Robison, announced a series of new measures.

Some of the main aspects of her Scottish Budget included retention of the Small Business Bonus Scheme, and £200 million extra funding for the Scottish National Investment Bank. Sean Cockburn, director at Forvis Mazars in Edinburgh, said that, as expected, there was relatively little in terms of tax changes announced by Robison. He explains: “Scottish taxpayers will have been relieved to learn no further tax bands are being introduced in 2025/26. The finance secretary announced a 3.5 per cent increase to basic and intermediate rate bands that will help some low and middle-earners, but Scots will continue to face higher tax rates than their counterparts in the rest of the UK.

Cockburn adds: “In a further blow to the rental industry, the additional dwelling supplement that applies on the purchase of a second property was increased from 6 to 8 per cent with immediate effect, with the main rates unchanged.”

Looking ahead to 2025, and personal finance New Year resolutions that people could consider, Tom Munro, financial planner with McHardy Private Wealth in the Capital, recommends savers and investors consider doing the following:

◆ Diversify investment portfolios to spread risk to potentially increase returns.

◆ Stay informed with Scotsman Money about market trends and economic developments to help them make investment decisions.

◆ Set clear financial goals and create a plan to get them.

◆ Regularly review and rebalance investment portfolios to ensure it aligns with risk tolerance and goals.

◆ Consider seeking professional financial advice to optimise investments.

Meanwhile, Andy Bolden, financial planning director at 7IM, says: “Around 90 per cent of New Year resolutions are likely to fail within the first month. Some reasons include the idea that we’re thinking too big, we’re not considering the ‘why’ behind them, and the fact that we may not be ready for change. For your finances in particular, understanding the ‘why’ is key. What are your actual goals? Not just money goals, but the life goals for you, your family and loved ones – perhaps for your business too? Think these through and then you can work backwards to today.”

He explains that a good way to work this through is by using financial modelling or cashflow forecasting. He says most people will struggle to visualise what needs to be done today to get to a five, ten or 25-year goal. Modelling breaks this down and identifies simple, initial and, importantly, small changes that can be made in 2025, the benefits of which can multiply over the years.

Bolden adds: “The second point is to diversify your money. When you’ve identified some plans, don’t commit all your cash into just one thing. For the longer-term plan, make sure you take advantage of workplace pensions if available, as these tend to be lower cost and co-funded by your employer. If you have one, that’s free money into your pot that you won’t get elsewhere.“

Then also think about tax-free ISAs or other tax-efficient arrangements dependent upon your wider circumstances. Having several different pots, even if they start small, means you can target them for different things. Plans fail because things get too complicated, so these pots will help with clarity of thought.

“However, make sure you always keep a cash float too in easy access accounts. As a guide, aim for perhaps six months’ worth of net income as a float. Just in case anything crops up as an emergency or unplanned spend, you won’t then need to break into your longer-term pots and disrupt your plans.”