It’s that time of year when financial pundits invariably start dusting off their crystal balls and make predictions for the coming year.
What’s next for the FTSE 100? When will interest rates start to fall? What will be the big growth stocks to watch in 2024? We mustn’t forget to mull over house prices too and start speculating over the outcome of a looming general election.
However, my crystal ball is staying in its cupboard, and while I might pore over all the financial predictions for 2024, I don’t think I will let them hold too much sway over my decisions.
For me, 2024 won’t be about speculation or tactical plays; rather I’ll be focusing on getting my “house” in order. Running my own business for the last three years has kept me busy, and despite writing about money every day, my own financial housekeeping is sometimes left wanting.
With that in mind, here are some of my financial priorities for the coming year:
1) Sort out my savings
If there is one thing I miss about being employed, it’s PAYE. The need to calculate how much tax you owe, every time you get paid and setting it aside, somewhere you won’t spend it, is the bane of every freelancer’s life.
In my defence, I’ve always been pretty meticulous about my accounting and I religiously deduct tax as soon as I see that an invoice has been paid. Where I can’t be quite so smug is what I do with that money – I’ve just been paying it into the savings account that is linked to my current account. Three years ago, that wasn’t a problem as interest rates were pitiful wherever you parked your cash, but now that interest rates have risen so dramatically, I’m really missing out.
- HMRC tax raid hits savers: tips to protect your income
- Why you should think twice about making a big move to cash
So, I have done my research and found an instant access account paying 4.84%, without a bonus (I can’t be faffed with bonuses) and I am now in the process of gradually shifting all that money I will eventually need to pay to HMRC into it. That money might not be mine to spend, but I might as well make it work as hard as it possibly can for me, while it’s sitting in my account.
2) Top up my pension
I do love being self-employed, I really do. But, if I was to have a moan about one more thing, it would be the workplace pension. It’s rubbish.
Although I do pay into a SIPP, month in month out and get the benefit of tax relief on my contributions, I don’t have an employer paying into it on my behalf. And when you consider that many generous employers match employees’ contributions (up to a limit), that’s quite a significant loss.
The government has at least acknowledged that self-employed workers have been left behind in the roll out of auto-enrolment, but it hasn’t, as yet, proposed any solutions that will encourage or incentivise retirement saving among the self-employed.
That means the pressure is on me to take charge of my pension.
At the moment, I know that I am not paying enough into it. When you have a variable income, it’s difficult to work out how much you can realistically afford to save each month. But I can now see that the direct debit I set up when I first went self-employed – and had no idea what I would earn from month to month – was uneccessarily cautious. I need to scrap that direct debit and increase it.
And, when I come to do my tax return, I’ll be sure to highlight how much I have paid into my pension, to ensure I get the right amount of tax relief. If I can, I might also explore any opportunities to top up my SIPP with a lump sum to simultaneously reduce my taxable income and boost my retirement savings.
3) Cut the cost of my ISAs
Life is feeling pretty expensive right now and, as much as I would love to increase the amounts we are paying into our individual savings accounts (ISA) and Junior ISAs, that’s probably going to be a stretch too far.
What I am going to do though is to keep trying to cut my investing costs.
When I first started investing in the early 2000s, certain fund managers had an almost celebrity-like status. There was a huge focus on active management and, as a financial journalist, I was regularly sharing fund recommendations from experts. Investing in a tracker fund felt lazy, embarrassing even. If I couldn’t pick out fund managers myself, how could expect readers to do the same?
Roll on the years and I’m now rather evangelical about the benefits of passive investing; I’m proud to be a lazy investor. Not only is it substantially cheaper but, from a busy working mum perspective, it’s also just much less hassle. You know that your fund will do what the index does – you don’t have to keep tabs on a fallible human at the helm or worry if a rival manager with a similar job title, running a similar fund, is doing a better job.
Performance might not be stellar, but given that many active fund managers still don’t consistently beat their index, I don’t want to sweat blood to hunt down the few that do.
I’ve gradually been phasing active fund managers out of our portfolios and I wonder whether 2024 will be the year I say goodbye to them once and for all.
4) Spend where it matters
I’m sure I’m not the only one who feels like there’s an open plug in my bank account – especially at this time of year. So in 2024, another priority will be to look at our spending.
It’s not about being super-frugal and cutting out all “unnecessary” expenditure, rather it’s about focusing our spending on things that matter and make a difference to our lives.
I have always been a bit of a spender – but I’m chuffed that, with the exception of an emergency pair of woolly socks, I have now gone six months without buying any new clothes. And, having ticked off that milestone, I can honestly say that I have no desire to hit the shops.
I’m also happy to save as much as I possibly can on things such as my phone and the car, and rein in the numerous subscriptions we pay each month.
What I would really miss though is a takeaway once in a while at the end of a gruelling week, trips into London with the kids and the ability to be a bit spontaneous.
When we talk about financial planning, the focus is largely on long-term goals and rightly so. But it shouldn’t be totally at the expense of the short term. Our kids are growing up far too fast and it won’t be too long until the eldest, at least, leaves home. That means, along with saving up for retirement, it’s also important that we’re financially prepped to be able to make the most of the here and now.
Right, now where did I leave that holiday brochure?
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