January is an opportunity to make resolutions and commitments. There is no reason why we shouldn't use it to bring order to our finances as well!
This week, Tom Fleming takes you through a number of painless tweaks you can make so you can be sure that your finances are still on track after all the commotion of Christmas.
Review that roadmap
The first thing to do is undertake a rapid review of your circumstances. Has anything changed? Are your goals still the same? Make sure you have identified your objectives. Clear goals keep you focused and help you stay on track.
Inflation may be falling…
… but it is still twice the Bank of England's 2% target rate, and living costs remain disproportionately high for many. Careful budgeting is therefore required to make your money go further. Heating and eating are obviously the basics, and there is not much in the way of room for manoeuvre when it comes to pruning those costs. But it might be worthwhile reviewing your monthly income and outgoings and trying to put a monetary value on those “irregular spends”. Might some of that money go towards saving and investing instead?
Tackling inflation might be getting easier now, but it is still important to make sure that the value of your savings is not eroded. Interest rates are more attractive than they have been for over a decade, so it makes financial sense to have some cash available to cover any emergencies. But investing remains the best option if you really want to beat inflation over the longer term.
Remember your time horizon
At Investment Quorum, we invest for the long term. But that does not mean that you should not check in and see how your investments are doing every now and then, particularly if your own circumstances change. And changes in circumstances could include everything from getting a new job to suffering a bereavement.
So, taking stock and ensuring that your investments are still aligned with your personal circumstances is sensible. A quick review to see if you can save or invest more with any spare cash you have floating around is usually all you need.
More complex issues are definitely something you can discuss the next time you check in with us. After all, understanding your objectives and the relationship you have with risk is all part of us getting to know you and evolving a relationship with you. We can help you put together and hone a bespoke investment strategy, making adjustments as and when needed.
Maximise your tax-free allowances
There are just over three months of the tax year left. So, make the most of whatever allowances you have available to you.
The easiest and most obvious vehicle available is an individual savings account. There is no income or capital gains tax to pay on an ISA, and you can currently invest up to £20,000 every year. If you have not yet used up your allowance, see if you can do so before the end of this tax year. And remember, you can use your partner’s allowance too.
January is also an opportunity to review your pension. Have you kept track of all of your pensions throughout your career? Do you know what they amount to? Government tax relief is designed to encourage you to save into your pension. The relief you get is based on how much tax you pay. If you are on the basic rate, you will get 20% tax relief. So, for every personal payment of £800 that you put into your pension, the government will add £200, resulting in a total gross contribution of £1000. Higher rates of tax relief are available for higher and additional-rate taxpayers.
The amount that you can pay into your pension is capped at £60,000 for the 2023/24 tax year. And the lifetime allowance regime is changing on 6 April.
The end of the tax year is nigh
Your own specific circumstances will determine your tax situation. With three months of the tax year left, now is the time to take stock with us so we can make sure that we are managing your finances as tax-efficiently as possible. Talk to us sooner rather than later.
Christmas is a time for family upheaval
Sadly, significant numbers of people file for divorce as soon as Christmas is over. Consequently, many find themselves having to review and update wills, powers of attorney and other arrangements that they have put in place to protect their loved ones.
With some careful thought and forward planning, there is a lot that you can do to make sure that your family has the protection it needs.
Now is a good time to make sure that you are on track to leave as much as you can to your loved ones, rather than to the taxman.
We are a phone call away
You can probably find much of the help and advice you need online. But remember – we make it our business to know you, and if there’s one thing of which we can be certain, it’s that when it comes to financial planning, there is no one-size-fits-all solution.
We are always available to talk things through and tweak your financial roadmap to reflect any changes in your circumstances. It's never too early to start planning for the future.
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