As we progress into 2023, we start to wonder did we manage to achieve our financial goals last year and think about/consider our objectives for this year.
Have a plan
Whether it is to start a pension, get out of debt or buy a property, the main thing is to ensure you have a plan. As an engineer you do work out solutions to problems and plan and budget.
We feel you should treat your finances the same. Starting with a financial budget every year is imperative. There are some great free online tools such as one on the Alphawealth.ie website. Also, check out our forthcoming webinars.
The key is to see what you are spending your money on to ensure you are spending your money wisely. If you are in a joint situation, it is good to do this as a couple, but for the sake of this illustration using a single person earning, say €40,000 p.a. (circa €2,600 per month net).
On a separate tab you then put your committed outgoings, such as mortgage/rent, bills, insurances etc. You then decide how much you want to put into a pension/savings. I would recommend between 10%-20% of your gross earnings. So in this case somewhere about €350 per month would equate to 10% of earnings. What is left is to be used for discretionary spending on groceries, going out etc.
While this may seem too simplistic, it really is important to think of your finances this way. If you wait until the end of the month once you have spent everything to see what you have left for pension/savings you will find you won’t achieve your goals.
If you find this is not possible then my advice is to engage with a financial advisor. The purpose is to get some advice around what improvements you can make to reduce costs such as mortgage rates (huge opportunity) and also costs of insurances and debt.
(Details regarding our forthcoming webinars can be found here.)
For somebody with various loans there is some management in this. For example, if you have a credit card with an outstanding balance, a credit union loan, and a mortgage, the mistake you might make is to try to please everybody rather than focus on the highest cost debt first. In this example, the credit card needs the most focus, so try and get this paid off as soon as possible.
Doesn’t make sense
I have met clients who have loans of say €5,000 and cash balances in their bank of more than €5,000. It doesn’t make sense. Basically, you are borrowing your own money and paying the bank anything from €250 to €500 per year for the privilege.
We have found a lot of mortgage clients are paying much too much for their mortgage, with rates north of 3%. Interest rates are rising and may continue to do so throughout 2023 so it is always worth checking with your current bank as to what your options are and in some cases to refix to avoid further rises.
The additional cost of a 0.5% difference in mortgage per annum on a mortgage of €300,000, will amount to more than €10,000 over 15-plus years. Whether you are employed or work for yourself, an independent adviser will advise you on the best plans for you and be able to offer them throughout the market at the lowest fees.
Nick Charalambous is managing director of Alpha Wealth, an Independent financial advisory company with offices in Cork and Dublin and providing Zoom meetings throughout the country. He can be contacted on 086-0827925 or firstname.lastname@example.org