We outline the things you can’t afford to overlook, from keeping your passwords safe to starting a portfolio
This article has been amended.
Those feeling the zeal of new year good intentions may be thinking about overhauling their finances. There are many ways to improve the deals you get on your bills or accounts and it can be hard to prioritise. Here’s what Times Money thinks should be top of your to-do list for 2017.
1 Invest in a fund
Starting out in investment is daunting, but having some cash in stocks, funds or bonds should help your money to grow. Adrian Lowcock, investment director at Architas, the multi-manager, says: “This looks set to be an interesting year. Markets are riding high and investors are more positive than they have been since the financial crisis.”
Try dipping a toe into investment by using a website such as Hargreaves Lansdown, AJ Bell Youinvest or Charles Stanley Direct. These so-called fund supermarkets allow you to set up an account, put some money in and choose funds that diversify your savings across a range of investments. Regularly topping up your investments is better than waiting for a stock market fall to buy cheaply, because even experts struggle to predict when this will happen.
For investing in the UK stock market a popular choice is the JO Hambro UK Opportunities fund. The manager has a very strong emphasis on protecting capital, says Jason Hollands, the managing director of Tilney Bestinvest, a wealth manager. For the US, the Schroder US Mid Cap fund is a good choice. The manager is a cautious investor who focuses on dodging losses rather than chasing winners, says Mr Lowcock. Both funds have fees to pay the fund manager who picks the shares.
A cheaper way to invest is through a tracker fund, which has no fund manager but follows all the companies on an index. The iShares Ucits Core FTSE 100 ETF charges only a tiny 0.07 per cent of your investment as a fee. Be prepared to feel the full force of the FTSE’s ups and downs though.
“Passive funds such as these work best in bull markets, because they are fully invested in the market. Conversely they will experience the full impact of any market declines,” says Mr Hollands.
2 Max out your Isa allowance
“The best way to grow your savings is to use as much of your annual Isa and pension allowances as you can. These are the best ways to grow your wealth,” says Mr Lowcock. Until April savers will be able to put away £15,240 in a cash or stocks and shares Isa, or a combination of both, and not pay any tax on the interest.
The rules become even more generous at the start of the next tax year on April 6. The new personal savings allowance will come into effect, which means basic-rate taxpayers can earn £1,000 interest a year without paying any tax. Higher rate taxpayers will be able to earn £500 interest tax-free. Additional-rate taxpayers will have to pay tax on all of their savings interest.
Also from April 6, those aged 18 to 40 can take advantage of a Lifetime Isa and get a 25 per cent top-up from the government on their savings. The account is designed to help you to save a deposit for a first home or for retirement — your savings will get an automatic top-up after one year and then monthly thereafter. “You will be able to save up to £4,000 each year and you can then use your savings and bonuses, which are tax-free, when you’re ready to buy your first property,” says Patrick Connolly, a financial planner at Chase de Vere, the independent financial adviser. Be warned that there will be a penalty for taking your money out of the account before the age of 60, unless it is to buy your first home.
3 Keep your passwords safe
There have been so many issues with online security that it is more important than ever to have your passwords and login details stored securely. One thing you can do today is set up an account with an online password manager, which will securely hold your login information on an encrypted database and can generate random high-strength passwords for you. Dashlane, Passpack and RoboForm are popular options.
If you are thinking more long term, consider setting up a password manager to contain the details of all the logins for any accounts that members of your family may need in the sad case of your death. It will give you a “master” password to share with a trusted loved one or solicitor.
4 Keep on track with a money app
There are several online tools you can use to keep track of spending and view all your bank accounts in one place. Money Dashboard is a free app, which has been downloaded more than 100,000 times and had good feedback. You enter your online banking login details and the app will automatically categorise your spending into groups such as lunch, transport or clothes so you can see how much goes on different areas and therefore target what you need to cut down.
5 Pay down debt
Britain has been on a debt binge and our outstanding credit card balances, car loans and household borrowing are close to the levels reached before the financial crisis of 2008. If you are among the millions of Britons with loans, try to make overpayments to reduce your debt faster. Transfer credit card debt to one of the many interest-free deals available — MBNA has a 0 per cent rate on balance transfers for a record 43 months, with a 3.29 per cent fee.
Peter Tutton, the head of policy at StepChange Debt Charity, says: “Alarm bells should be ringing. Experience shows how such increases in borrowing can leave households over-indebted and vulnerable to sudden drops in income that pitch them into hardship.”
6 Consider remortgaging
Mortgage interest rates have come down considerably so it is worth checking if there is a cheaper deal you could switch to. Mortgage providers tend to switch borrowers on to their standard variable rate when the introductory deal ends and these are invariably more expensive.
“Millions of people in the UK are on a standard variable rate, which means they are probably paying way over the odds. Many of these borrowers may have slipped on to it without realising,” says Dominic Baliszewski, the director of consumer strategy at Momentum UK, a consumer information company.
Some of the best remortgage deals at the moment include Furness Building Society, which is offering a 1.24 per cent rate fixed for two years on an 80 per cent loan to value. It has a £999 arrangement fee. Melton Mowbray Building Society has a 1.5 per cent rate fixed for three years on a 65 per cent loan to value. There is no fee.
Correction: We incorrectly stated that the new personal savings allowance by which basic-rate taxpayers can earn £1,000 interest a year without paying tax would come into effect on April 6. It was introduced on April 6, 2016 (Weekend Money, Jan 7).