IT’S THAT TIME of the year again when our minds start to concentrate on how we are going to do everything better this year compared to last year – get healthier, eat better food, get fit and save money.
We can’t help you with the first three, but we can definitely help you when it comes to saving money in 2024.
This is not one of those articles about how you need to give up on your favourite biscuits, cut back on booze, or dial down the smokes. It’s the opposite. We’re on a mission to make sure you grab everything available when it comes to building your long-term wealth and financial resilience. Time to load up.
Chances are that things have moved on since you last dusted down your accounts and had a deep look at your financial situation. Markets have moved, allowances have gone up and costs have reduced. Most important of all, it’s likely your own position has shifted. Maybe your job, your family situation, or your income have all changed. That brings new needs and new opportunities.
Everyone’s situation is different and there’s no substitute for personalised advice, but at our core, most of us need to cover the same bases with our financial plan: covering our health, our wealth, our house, and our savings. Read on to find out how you can get the most out of your financial situation in 2024 and beyond.
Firstly, the big one – pensions. Your pension is important because it will pay you an income when you stop working. You’ll want it because for many of us, the State pension is unlikely to exist in its current form when we retire. This year, 2024 is shaping up to be a big year for pensions in Ireland — there are several big changes.
Firstly, we’re told that auto-enrolment will finally arrive. This is the long-delayed provision of an opt-out pension to any employee who doesn’t currently have a pension through their work.
What does that mean for you? It depends. Auto-enrolment is a start, particularly if your employer offers few benefits and you have no plans for a pension. In that case, get ready to pay 1.5% of your salary into an auto-enrolment pension when it starts, later this year.
On the other hand, if you’re a top-rate taxpayer, and have the chance of getting employer contributions into your pension, you can likely save more tax and build more wealth by putting your own pension in place, rather than waiting for the government’s one-size-fits-all approach. Sign up for your work pension, or get some independent advice on setting one up.
The second big change is for people approaching retirement. From today, 1 January, the State pension is getting more flexible. Up to now, it’s been paid from age 66. Now, it can be deferred until up to age 70, with the opportunity to increase the value of the payment when you do draw it down. From today, too, access to the State pension will improve for long-term carers so if you have spent more than 20 years providing full-time care to an incapacitated person, you may be entitled to enhanced state pension provision.
Thirdly, if you’ve got a big birthday in 2024, remember that your age-related pension contribution level will go up. For example, in the year you turn 50, you can claim tax relief on 30% of your income (up to €115,000) when you invest it in a pension. The final change is one you can make yourself: dust down your pension and look at the results, the costs and the advice you’re getting. If they’re not up to scratch, take action and change out your funds, your plan, or your advisor – or maybe all three.
At first look, health insurance is a minefield of complicated plans, wildly diverging costs and stuff you never thought you’d need. You don’t even need it for many areas of healthcare. But like all insurance, if you do have cause to use it, you’re very glad it’s there.
Health insurance isn’t like a lot of financial products. You’ll be pleasantly surprised if you lift the phone to one of Ireland’s three health insurance providers (Irish Life Health, Laya and VHI). Why? Firstly, knowledgeable people answer the phone. None of the ‘your call is important to us’ stuff: they can help you get a grip on your options.
Secondly, more cost isn’t necessarily more benefit in health insurance. If your plan is a few years old, there’s a reasonable chance moving to a cheaper one can offer better benefits.
Thirdly, it’s not like, say, car insurance, where claiming for a ding eliminates your no-claims bonus and costs you higher premiums for years to come. Claiming on your health insurance is easy and doesn’t push up your annual cost at all.
And fourthly, the younger you are when you take out health insurance, the lower cost it is, because the government wants us to take out private healthcare insurance. It’s complicated, but basically, it pays to take out health insurance before you hit the age of 35.
So, whether you are under 35 or haven’t updated your health insurance in a few years, call around the three providers and see what better deals you can strike on your health insurance this year.
If you’re a homeowner, your mortgage is likely one of your biggest expenses. But it is also true that one of the biggest savings you can make is changing your mortgage.
Because it’s such a long-term commitment, seemingly small improvements can make a huge difference. For example, paring back your interest rate from 5% to 4.8% on a 25-year mortgage for €300,000 would save you €10,000 over the life of the mortgage.
For lots of people, rising interest rates in 2023 have been a shock to the system – especially those on tracker rates or low fixed rates which came to an end.
So, if your mortgage deal is coming to an end in 2024, be prepared to search the market for better rates. If you have paid down a decent amount of your mortgage, or the value of your property has grown, consider if you can get a mortgage based on a lower loan-to-value ratio – they’re generally cheaper.
And before you fix at a new rate, consider if it is worth staying on the variable rate for a time. Right now, variable rates are often lower than fixed rates. It’s expected that central bank interest rates will start to fall in 2024 and if that occurs, it will filter into both variable and fixed rates over time.
Having dealt with your retirement plan, let’s turn to your investments. Unless you’ve been living under a stone for the last two years, you will have spotted that inflation is still high, investment markets are choppy and Irish banks pay next to no interest on cash deposits.
If you’re sitting on cash, consider your options. Doing nothing is the right one if you need the cash in the short term, or you’re keeping a few months’ salary in a savings account. If you want a cash-like return and risk, it is possible to get 3-4% by placing the money elsewhere – although that’s likely to change during 2024, as interest rates peak and gradually reduce. And if your timescale is three years or more, it’s worth looking at options to grow your money more aggressively in the investment markets.
Then there’s the stock market. To say the least, it’s been choppy out there. Tech has recovered strongly in the last year and looks highly valued. Many other sectors have lagged. Now’s a good time to assess if your investments are balanced appropriately for your timescale, appetite for risk and reward and wider wealth.
My last tip for you as we head into 2024 is to protect what you’ve got – particularly if people around you depend on your income and your help. For most of us, that means having insurance to protect your income if you became unable to work, or if you passed away.
This doesn’t need to be expensive. It’s about peace of mind and an element of protection to soften the financial impact if the worst happens. For many people, a commitment of €20-40 per month can make a meaningful impact on protecting those around you financially against that risk. And the earlier you start, the cheaper the cost. For example, a 30-year-old man could put €200,000 of life insurance in place for 25 years for a monthly cost of around €14. For a 40-year-old, the same level of cover for 15 years would cost around €20.
While there are rarely savings to be made switching providers on your life cover over time, it is worth reviewing the type of cover you have and whether you still need these benefits. For example, you might have changed jobs and have cover with your new employer. In the case of mortgage protection cover, if you’ve paid down some of your mortgage, you could reduce the benefit to match the new balance and reduce your monthly costs.
Whether it’s optimising your insurance, your savings, or your debt, almost everyone can improve their financial position by making some changes in 2024. Remember, no one cares more about your money than you do, so get ready to think about your specific needs, ask hard questions and grab a big helping.
Ralph Benson is Head of Financial Advice at www.Moneycube.ie.
To embed this post, copy the code below on your site
have your say