There’s something very cleansing and refreshing about January. An entire year stretches ahead, full of possibilities. It’s a time for decluttering after the bustle of Christmas, cutting down (whether that’s spending or treats!) and planning for what’s to come.
In the same way that we might clear out that cupboard (or the entire loft!), count up gift vouchers or use up leftover gym passes, there are lots of ways we can get our finances in order as the new year begins and we prepare for the end of the tax year.
So here are five things you can do in January to help you feel in control of your finances and embrace that fresh new year feeling (including a curveball to get you thinking. Clue: skip to number five).
1. Good Housekeeping
January is a great time to review your regular outgoings. Spending has a tendency to creep up throughout the year as costs increase and we start buying new products or trying new services.
Reviewing your finances as a whole once a year is a good habit to get into. Understanding your outgoings through a detailed budgeting exercise helps you identify where you’re spending more compared to last year and where you might be able to cut back.
Seeing outgoings grouped together and as a percentage of overall spending, can give you important insights into your spending habits, helping you feel more in control.
2. What a relief! (Tax allowances)
The 2021/22 tax year ends on Tuesday 5 April 2022. It’s the date when many allowances reset, so keeping track and ensuring you’ve made full use of them can reduce your tax liability and help you boost your wealth. Reviewing your finances ahead of the tax year end could reduce the amount of tax you pay and improve your financial security in the future.
Key allowances and exemptions to consider:
ISA Allowance
Use up your £20,000 ISA allowance to maximise tax-free savings. Choose one account or spread the allowance across Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs, and Innovative Finance ISAs.
Pension Annual Allowance
Pay up to £40,000 into your pension each tax year and benefit from tax relief.
Dividend Allowance
Draw a tax-free dividend of £2,000 to boost your income without increasing your tax liability.
Inheritance Tax (IHT) annual exemption
Gift up to £3,000 to loved ones now to reduce the value of your estate and reduce your IHT bill.
Capital Gains Tax (CGT) annual exemption
Make profits of up to £12,300 before CGT is due using the CGT allowance.
3. Shoot and score (Financial goals)
Has the pandemic changed what’s important to you? Or how you want to spend your time? If so, now could be a great opportunity to reassess your financial goals.
As Antoine de Saint Exupéry said: “a goal without a plan is just a wish”. But plans change, and goals do too. Be clear about your ultimate aim and you’ll give your money purpose.
If you’ve been through our Lifestyle Planning process, we’ll have asked you some pretty big questions to help you work out what matters to you and what you want from life.
January is the perfect time to revisit these questions and check in with your answers. Knowing where you’re heading helps to put you in control and makes clear any adjustments that might be needed. If anything significant has changed, just let your Financial Advisor know, so we can help you get there.
4. Subscribe to a lower-cost life
Subscriptions are on the increase. We remember the days when the only thing you could subscribe to was a magazine. Now you can subscribe to anything – even, it turns out, a sofa!
Subscriptions can save you money but they can also mount up. £5 here. £10 there. Amounts that seem small on signing up, can seem rather large when they’re all added together.
One of our favourite – and particularly satisfying – financial clear-out strategies is to write a list of all our regular subscriptions, as well as the cost of each, and adding them all up. Try it, and then review each one in turn and consider how much you use it and whether it brings you joy. You might be surprised at how much you spend on subscriptions. And at the ones lurking in the list that you barely use, or that you’ve fallen out of love with.
Knowing how much you spend on subscriptions helps you regain control and is an easy way to quickly cut costs if you ever need to.
5. Bucket of dreams
Ok, so a bucket list isn’t strictly in the “financial clear-out” or “feeling in control” category. In fact, your bucket list items may actually be about losing a little control! But at Hartsfield, we’re all about encouraging you to pursue your dreams and not to settle. So, for us, ensuring that you have the financial means to live your best life is important. And it’s the perfect antidote to the January blues too.
So please indulge us when we ask; what’s on your bucket list? And have you started the new year with a resolution to tick something off?
If the last two years have taught us anything, it’s to live in the moment. Taking back control of our lives after Covid stole the show is important, and we want to help you say “yes” to the things you’ve always dreamed of doing.
So, this January, it’s time to review your bucket list. Or, if you don’t have one, create one. Take time to carefully consider every item on your list. Circle any activities or trips that are a real priority. The ones that matter most to you. The ones you’ve been dreaming of for a long time.
Try to whittle it down to five and then narrow it down further to one or two things you’d LOVE to do this year. Contact your Hartsfield Financial Advisor and we’ll help you manage your short term goals and longer-term dreams.
Get in touch
If you would like to discuss getting your finances in control as we head into the new year, please get in touch and book a free financial consultation today.
Please note
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.