New Year’s resolutions don’t all have to be about giving up chocolate and alcohol

Writing down financial goals may not mean you’ll actually achieve them, but it increases your chances of doing so.
Writing down financial goals may not mean you’ll actually achieve them, but it increases your chances of doing so.

It’s only the second day of the new year and you’re probably fed up with reading about resolutions. However, they don’t all have to be about giving up chocolate or alcohol, or rising before the sun to exercise.

These tips for 2018 don’t have to be done with any great urgency; rather, think about the following advice as something you can check in on over the year as your appetite for financial management ebbs and flows.

1: Decide on your goals

An obvious one, but how many of us have ever taken out life insurance, or embarked on a renovation without thinking of the wider impact of such a move?

Writing down your financial goals may not mean you’ll actually achieve them (sorry fans of The Secret) but it will probably increase your chances of doing so.

If you already have a mortgage, there are three things you should be thinking about this year. The first is checking you’re on the right rate; after all, one thing we’ve learned from the tracker scandal is we can’t rely on the banks to get it right for us.

The second is to consider a switch to another product or competitor. With house prices continuing to rise, your loan-to-value (LTV) ratio will have fallen which should make you liable for a cheaper mortgage.

Thirdly, pay more than the minimum. While you could be doing something else with your money, for most of us, the peace of mind that comes with inching away at your mortgage is hard to beat. A little effort can, over time, produce substantial returns.

By overpaying each month you’ll reduce what you owe the bank and cut the term of your mortgage. It also means you’ll cut your interest bill. As you’ll be enhancing your LTV ratio, the bank may offer you a keener interest rate which will have another cost-reducing impact.

Consider someone on a €250,000 mortgage with 17 years left to go paying interest at a rate of 3.7 per cent. They are currently making repayments of €1,653 a month. If they increased their repayments by €100 each month it would knock 16 months off the mortgage term, saving them €7,302 (based on interest rates staying where they are).

If they bumped up payments to €200 a month, they would cut the term by 30 months and save themselves €13,454 in interest.

Bank of Ireland has a calculator which can help you work out your savings.

Just remember to tell your bank you want the over-payment to go against the principal amount.

You may not do it this week or next week, but at some point this year take the time to read your annual pension benefit statement and figure out how your retirement is shaping up. You owe it to yourself.

And if you don’t have a pension, is it time…