It is that time of year again when we make our new year resolutions, only to break them in the first week.
But maybe this year make a few financial ones that will stick.
Try to be better with money and cut some costs on the farm and personally.
Financial farm plan
Expenditure on the farm varies widely from year to year. It’s a good idea to do a budget each year, perhaps with the help of your adviser, and include all items of expenditure and all potential sources of income. This will give you a good outline of your budget for the year ahead.
Include a contingency amount for unexpected expenditure, so at least you will have something in reserve in an emergency.
Is there going to be extra personal expenditure you will need to plan for, such as home or farm improvements, educational costs, pension funding or a dependent relative care. All these will need to be included, if applicable.
Look at your household bills - is there better value around if you switched your utility suppliers?
Look at all costs, but in particular the areas of high cost. The cost of inputs such as fertiliser have hugely increased and this is quite likely to continue. You will need to budget for this.
Is it possible to buy in bulk (or buy less) or if you have availed of merchant credit in the past, is it possible to pay on time to avoid interest charges? Merchant credit is one of the most expensive means of finance.
Electricity, another high cost on farms, can vary widely, depending on the type of enterprise. Can you negotiate with your supplier for a better rate or could you consider solar panels or other energy sources? Is there an off-peak rate available?
Interest rates and bank charges
Look at the interest rate on your mortgage and loans. Sometimes we are so eager to get the loan or mortgage, we pay little or no attention to the actual interest rate.
Is what you are being charged the best rate around? If your mortgage is on a variable rate, a fixed rate would likely be cheaper. Is your lender the most competitive or should you consider switching your mortgage or loans to another bank?
If you have an overdraft, always stay within the limit, as otherwise you will incur surcharges and fees which can prove very expensive. Agreeing a temporary increase in an overdraft in advance, if required, will prevent these extra charges.
Operate online bank accounts as much as possible - they are more convenient to use and you can save on time and travel expenses.
If you are self-employed, you really need to consider a pension. Could you live on the State pension of €253.30 per week in retirement?
The earlier you commence contributing to a pension, the more benefit it will be for you in retirement.
A pension is the most tax-efficient means of planning for your future. Age thresholds do apply (when considering how much you can contribute), for example, at age 50, you can invest up to 30% of your net income into a pension fund and claim tax relief at your marginal rate of tax.
Apart from tax relief, all growth in the fund is tax-free and 25% of the fund can be taken as a tax-free lump sum on retirement, which is capped at €200,000. Above this amount, you pay tax at 20% up to €300,000.
Being careful with money and having a proper financial plan for the year ahead will save you money.