January is the perfect month for developing new priorities and goals for the year ahead, but this financial plan will work anytime you need to put your finances in order. We have put a top-ten list together of important, but often neglected, tips and tasks that will help increase the wealth of you and your family over the years ahead.

It's all too easy to put off sorting out your finances because you don't know where to start, so, in keeping with QCK's mission to keep finance simple, we've put the most important tasks first. Just work through the list and skip any that don't apply to you.

 

1. Deal with your debts

You can't go wrong by tackling any debts you have first. It's all too easy to build up debts on store or credit cards and unauthorised overdrafts can quickly spiral out of control. Get on top in 2008 by planning ahead. If you can pay off your cards immediately, do so before you get hit by interest charges. Transfer any remaining debt to a cheaper card. You can find zero interest rates over 6 months for transferred balances which buys some precious time to pay the debts off. Work out your monthly expenses and give yourself a strict cash-only spending budget until you've got those debts out of the way.

While you're at it, get rid of any expensive store cards you may have: go on, take the scissors to them!

If your card debts are too high to pay off, talk to your bank. A consolidated loan will usually mean lower interest payments, but beware of exchanging a lot of small headaches for one very large one if you're asked to put your home on the line.

Even if you do nothing else, if you have debts, taking action to reduce your debt costs will make a major difference to your finances. You can compare credit cards at www.qck.com/credit-cards.html

 

2. Reduce mortgage payments

Most people don't think of a mortgage as a debt as it's underpinned by the property asset, but mortgages are subject to the same competitive market forces as any other source of finance and there are good deals out there. If you have a significant period left on your mortgage, you may well benefit from a cheaper rate, so it's worth shopping around. Why not resolve to review your mortgage every 5 years, starting this year? You don't necessarily have to switch lender - if your current lender can offer you a better deal than is available elsewhere, stick with them, but otherwise switch to the better deal. There is often a fee to move mortgages, so factor this in and make sure you understand all the conditions: particularly redemption charges for repaying early and any expensive linked insurance deals, before signing up to a new deal.

If you have spare savings, would they save you more than the interest they're earning if you used these savings to pay off part of your mortgage? A few minutes with the calculator could make a surprising difference to the overall lifetime cost of your mortgage (enough for a really good world cruise when you retire, or give you more financial breathing space if you lose your job). But do leave yourself enough spare cash for unexpected contingencies. You can compare mortgages at www.qck.com/mortgages.html

 

3. Review your home insurance

Now you've tackled your debts, it's time to look at reducing your expenses and insurance is often a cash grabber and shopping around is one of the quickest ways to save large sums of money.

The easiest way to arrange home insurance is through your mortgage lender - and 55 per cent of first-time buyers do just that - but this is usually the costliest way to buy insurance.

Every year, thousands of people blindly renew their home insurance with their current insurer, not realising that they could probably benefit from a superior level of cover at little, if any, extra cost. Or the same level of cover at a reduced cost. Most people don't think there's much difference between one home and contents insurance and another, but the truth is that insurers are competing for your business and there are good deals out there if you shop around (see www.qck.com/home-insurance.html). While you're at it, take a note to shop around the next time your car insurance is up for renewal.

 

4. Switch utility companies

A lot of us have been lazy about staying with the same companies in the past as the savings to be made used to be quite small, but all that has changed. According to Allan Asher, chief executive of independent watchdog Energywatch, millions of are seeing their energy bills skyrocket this winter. "It has never been so important for consumers to make sure they cut their energy bills. "It takes minutes to check whether you can get a cheaper deal elsewhere." As well as switching gas and electricity suppliers, take the opportunity to compare your telephone company with others. Deregulation has resulted in a plethora of suppliers competing head-to-head in a very price-sensitive market. You could wipe hundred of pounds off your annual expenditure in just a few minutes - that's not a bad rate of pay, is it? Compare gas and electricity providers online at www.qck.com/utilities.html and telephone companies at www.qck.com/phone-bills.html.

 

5. Switch savings accounts

Now you've cut down your expenses, it's time to look at making any money you do have work harder.

If you don't have any spare cash, here's how to start accumulating money. Look through the cash you spend to see what you could cut out to save a fiver a month. A fiver shouldn't hurt too much over such a long period. If that's too easy, could you manage ten, twenty or fifty pounds? Then set up a direct debit so it goes painlessly into a savings account. Any little amount starts the savings habit and you can always increase the amount if you get a pay rise. It's amazing how all adds up. The important thing is to commit the money so you get used to managing without it.

And make sure that any spare cash works for you. There is a huge difference between savings rates offered by banks and building societies right now. Don't even think of leaving your money where the rates are less than 4.0% gross. You can even get above 4.5% on some instant access accounts - try using a comparison table such as www.qck.com/savings-accounts.html. If you don't pay tax, make sure you fill in the form from the bank that allows them to pay you interest without deducting tax.

 

6. Start an ISA

If you've got plenty of spare cash you need to make it work even harder by choosing a tax-free investment. Start putting some savings into an ISA. Any dividends, interest or capital are tax-free and you do not even have to include this income on your tax return. The maximum that can be invested in any tax year in equities under a 'maxi' ISA is £7,000. You can invest up to £3000 a year in a 'cash' ISA, though your total combined annual limit for investing in ISAs is £7000. We like the look of FTSE tracking ISAs, as we forecast the stockmarket to do quite well this year, certainly out-performing property. Read more about ISAs at www.qck.com/isa.html.

 

7. Start a pension

Have you started saving for your pension yet? Or are you one of the 9-12 million people (around 40% of the workforce) that the Pensions Commission has warned will face retirement with little or no savings in place? Don't rely on the state pension for a comfortable retirement - if you have no other savings you'll currently get £105.45 as a single person and £160.95 as a couple per week (including the Guaranteed Income Top-Up). Not much is it? If you need a pension, start by checking out the information at www.qck.com/pensions.html

 

8. Take out Critical Illness Cover

Savings and a pension are great to have behind you, but it's worth protecting your income too. If you are 100% sure you will never fall ill with a serious illness, then critical illness cover is not for you. However, the reality is that 1 in 3 of us will be diagnosed with cancer in our lifetime. Those prudent enough to have CI cover will benefit from a lump sum payment plus an ongoing income for the duration of the illness. Most CI insurers will cover around 15 serious conditions including cancer, heart attack or stroke. It's especially important if you're self employed to have some sort of safety-net and you might also want to look at permanent health insurance which will help ensure you maintain your income if you are incapacitated. A good tip is, the longer you can wait before the payments kick in, the cheaper it is, so try and build up a contingency stash to slash your premiums. Most people can manage for 3 months or so.

More information at www.qck.com/illness-insurance.html.

 

9. Aim now to reduce Inheritance Tax

While you can't take it with you, there's no point forcing your family to give the taxman more than they need to. After all, wouldn't you prefer they have your hard-earned cash? On your death, the government will tax your assets, including your home, at a whopping 40% (apart from the first £285,000) unless you leave the lot to charity.

However, for those in the know, there are plenty of legitimate ways to avoid all or at least some of this IHT. There is the annual £3000 exemption, exemptions for certain marriage gifts and a useful one known as "normal expenditure out of income".

It is also possible to think in terms of giving sums away, surviving seven years and thus getting that gift out of the taxman's IHT "reach".

Not married, but own a house together? Make sure you hold the property as 'tenants in common' rather than as 'joint tenants', so that you can leave your half to whomever you choose to avoid leaving each other homeless. IHT planning might sound tedious, but the consequences of not doing it can leave a horrendous extra burden for your family at a time when they are least able to cope with additional worry. Just a couple of hours with an adviser can save your family a fortune. More information at www.qck.com/inheritance-tax.html. An indispensible guide on reducing inheritance tax has been written by Carl Bayley BSc ACA. Everything you need to know about protecting your assets from the taxman, is explained in this comprehensive and newly updated guide, How to Avoid Inheritance Tax.

 

10. Make a Will

Figures from the voluntary organisation Will Aid reveal that around 50% of people die without a valid will. Making a will is not expensive, although the consequences of not making one are. Even if you've sorted out the tax aspects of your legacy, it is important that you make a will so that you can ensure your assets are distributed as you want when you die. You also give yourself peace of mind knowing that you have put your affairs in order. By making a will you will spare your family and friends needless heartache and problems. Many of us dither about making a will. But if you don't want the taxman to take your money after you're gone, don't dither about! More information at http://www.qck.com/make-a-will.html

 

 

Now you've overhauled your major personal financial areas, you really will have something to celebrate for 2008!