Financial experts reveal how to take control of your finances in 2016

​Pay off your debts and find better deals for your bills before finding new investment opportunities, financial industry experts tell Rob Griffin

Where is your money going? Knowing this is the first step to a prosperous new year (Alamy)

It’s that time of year again when we write New Year’s Resolutions with the inevitable plan to visit a gym more often, but having splashed out a small fortune on Christmas presents it’s probably more important that we become financially fit in 2016. Britons now owe a whopping £61.2bn on credit cards, which equates to an average of £2,292 for every household, according to The Money Charity. When you consider almost £8m is spent every day – £5,429 a second – the situation is unlikely to change soon.

So what can you do to make a difference over the coming year? We asked a variety of independent financial advisers and industry observers to provide their top tips on cutting your monthly bills and making the most of your money.

Assess the situation

The most important first step is to go through bank and credit card statements for the past three months and work out what where your money is going, according to Justin Modray, founder of Candid Financial Advice. “You may have direct debits for long-forgotten gym memberships or insurance policies that you’re still paying out,” he says. “Make sure you know everything that you’re spending your money on and consider whether these expenses are still needed.”

Look for better deals

Once you know how the money is being spent, you’ll be in a better position to see where cutbacks can be made, points out Mr Modray. “It might be that these are all essential items but there may be ways to reduce the costs involved.”

For example, you may be able to get better deals on mobile phones, insurances and utility bills. “There are plenty of comparison websites these days to help you get better deals so take your time and look at what’s available,” he adds.

Pay off debts

Before you consider investing money, you need to pay off outstanding debts. The amount you will earn is likely to be dwarfed by the interest you’re paying – and the amounts owed have a tendency to spiral unless they’re tackled early.

If you can’t clear them, then at least consider moving credit card debts, for example, on to a card that offers zero per cent interest for at least a couple of years. However, factor into your sums that you will usually pay a 1-2 per cent fee for transferring the balance.

Put together an emergency fund

Before investing you should make sure that you have paid off any expensive debt and have enough money in cash to cater for any short-term emergencies or requirements, according to Patrick Connolly, a certified financial planner with Chase de Vere. It needs to be in an account that won’t penalise you for making withdrawals. “An emergency fund will stop you going into debt or being forced to cash in your investments at the wrong time if you need to get hold of some money quickly,” he explains.

Make your money work

Before deciding what investments will meet your needs you will need to establish how much money you need and your plans for the future. For example, will you need a certain amount set aside to put your children through university? If you are investing for less than five years then stick to cash – even though interest rates are historically low, argues PatrickMr Connolly. “This is because if you invest in the stock market and it falls in value you will have very little time to make back any losses,” he says.

Examine your investments

Darius McDermott, managing director of Chelsea Financial Services, advises people to review their investments at least twice a year to see if any unintended biases have crept in and that your investment decisions still stand up to scrutiny. “If an investment has halved don’t panic as these are only paper losses until you crystallise them,” he says. “Try to understand what’s happened, cConsider the background for the asset class, and compare how your fund has performed to its peers.” With other investments, the question will be: how much are you prepared to lose? If you are starting out, then look to invest regular premiums on a monthly basis rather than putting in a lump sum. By investing regular premiums you negate the risk of market timing because if the stock market goes down, you simply buy at a cheaper price the next month.

Be tax-efficient

You also need to make your money work harder by being tax-efficient, suggests Maike Currie, associate investment director for personal investing at Fidelity International. ‘Make maximum use of your personal tax allowance,

“From 6 April 2016, you can earn £10,800 before paying tax, meaning more of your wages will be out of the reach of the taxman,” she says. “Also, make use of tax-efficient vehicles such as ISAs and pensions. This year you can save £15,240 tax-free in an ISA.”