Keeping finances on track in 2023
A new year is an excellent opportunity to get on top of your money matters.
With the challenges presented by rising inflation, tax, and household outgoings, being in control of your finances is especially important.
Planning can help to keep you in control. Here’s our month-by-month guide to keeping finances in good shape.
JANUARY: BACK TO BASICS
Look at your income and expenditure using your bank statements and create a list of what goes in and what goes out. Think about how much you spend (aside from the essentials such as your mortgage and household bills) and where your money goes. Could you make savings?
If you find that unnecessary spending is a habit hard to kick, try the 30-day savings rule – take the money you were going to spend on an impulse buy and save it in a savings account instead for 30 days. But if you still want to buy that item after the 30-day period is up, go for it. Otherwise, the money stays in your savings. This idea is to help you overcome impulse spending and boost savings over time.
FEBRUARY: LOVE YOUR PLANET
Consider Investing For Good
More investors now want their money to help improve society, halt climate change or deliver greater diversity within businesses – as well as to make a decent financial return.
Many investment companies offer the opportunity for people to invest in companies that have a strong track record on environmental, social and governance issues – known as ESG investing.
There are funds which specifically back companies within the renewable energy infrastructure sector, such as solar or wind, are often popular. Though you can also invest in companies benefitting from the rise of electric vehicles. Alternatively there are broad funds which ensure all holdings hold sustainability or ESG matters at the forefront of their business.
Investors can also choose an impact investment fund. These funds only back companies that create a product or service that has a positive measurable social and or environmental impact.
Brace Yourself For Tax Changes And Bigger Energy Bills
Chancellor Jeremy Hunt will set out a Spring Budget on March 15, which could bring new tax measures. One to watch.
Meanwhile, the Energy Bills Support Scheme, which has provided a £400 non-repayable discount to eligible households to help with their energy bills over the winter, will end this month. Payments have been made monthly since October, with the last being paid in March.
APRIL: USE TAX ALLOWANCES
There are plenty of tax breaks available to UK taxpayers so make sure you maximise them before the end of the tax year (April 5).
Utilise your ISA £20,000 allowance and make sure any shares held are done so within the ISA wrapper. If you don’t use your allowance, you lose it.
Make sure you’re paying as much as you can afford into a pension – the tax breaks are unrivalled with tax relief on contributions at your marginal rate of income tax.
The new tax year begins on April 6, which refreshes your allowances. Early bird ISA investors can benefit from having money invested, as potential growth over the next 12 months could provide a valuable boost to your portfolio.
MAY: USE BANK HOLIDAYS WISELY
With plenty of Bank Holidays this month – including an extra one for the Coronation of King Charles III – you could use some of the time to clear out your cupboards. By selling stuff you no longer need or want, you can even make a profit to put towards rising bills, debts or family fun.
Equally you could put it into your ISA to boost your savings.
You can turn everything from clothes to computer games, toys and furniture into cash. Use free online services such as Gumtree or Facebook Marketplace or Music Magpie and WeBuyBooks for books, CDs and video games. With eBay, look out for weekends with low fees for listings. If you’re selling clothes you could try Depop or Vinted.
JUNE: ENSURE SAVVY SPENDING ABROAD
If you have a summer holiday coming up, make sure you don’t get stung on charges for using credit and debit cards abroad. Every time you tap your card at the local taverna or supermarket you’ll pay a fee of around 3% on top of what you spend. This can add hundreds of pounds to a two-week break. Plan ahead by applying for a credit card or prepaid card that has zero fees on foreign transactions. Check moneyfacts.co.uk for a list of available fee-free cards.
JULY: SPEND LOYALTY POINTS
Check the points you have built up on loyalty cards. You might have more than usual from supermarket schemes since you’ll have been spending more on your weekly shop since the beginning of the cost of living crisis. If you’re tempted to redeem vouchers at the checkout, remember that supermarket schemes can be far better value if you trade your points for vouchers for days out or experiences which could be handy for entertaining the family over the summer.
AUGUST: SET SAVINGS GOALS
Use the quieter summer months to check your savings habit as you can get to set in your ways and save the same amount each month for years on end. Review the amount you save and boost monthly payments as your earnings increase – as long as you can afford it. If you really want to boost your savings habit, it will help to set yourself some goals. Once you hit a milestone, it will be worth it.
SEPTEMBER: CONSIDER VCTs*
If you’re looking for greater tax savings than ISAs and pensions, Venture Capital Trusts (VCTs) offer investors attractive tax breaks in return for backing fledgling UK firms, which are by nature, high risk. The fundraising season for VCT companies generally starts around September time which means this is a popular time of year to explore what’s available. VCTs, have a generous allowance of £200,000 a year – compared to £20,000 for ISAs and £40,000 for pensions. For every pound you invest in a VCT you can get up to 30p back in tax relief. There’s tax-free capital gains and dividends – reinvested dividends qualify for tax relief too. You can claim to £60,000 back in tax – although you cannot claim back more tax than you owe. To qualify for the tax break you must hold the investment for at least five years.
* The value of an investment, and income from it can fall as well as rise. Investors could end up getting back less than they put in. Tax treatment depends on individual circumstances and tax rules could change in the future. VCTs are only suitable for UK resident taxpayers who can tolerate higher risk and have a time horizon of greater than five years. It is not suitable for all investors and it is recommended you get professional independent financial advice before investing in a VCT.
OCTOBER: MAKE A WILL
It’s not a cheery prospect but making a Will is really important. October is Free Wills Month where some solicitors offer a free Will-writing service to promote the importance of making some important decisions and getting them on paper. When a person dies without leaving a valid Will, their assets are distributed according to the law, which may not tally with your wishes. The average cost of using a solicitor to draw up a Will starts at around £150. Find a solicitor through The Law Society at solicitors.lawsociety.org.uk.
NOVEMBER: BEWARE BLACK FRIDAY
Take care not to get caught up in the Black Friday spending frenzy. Often the promotions on Black Friday aren’t genuine anyway. Consumer group Which?1 claims that only one in seven (15%) deals on Black Friday offer a genuine discount. It found that 86% of deals were actually cheaper or the same as their Black Friday price in the six months before the sales event and 98% were cheaper or the same price at other times in the year. None were cheaper on Black Friday alone.
DECEMBER: KEEP A LID ON SPENDING
Whatever your household income, make sure you take time to work out how much you can afford to spend over Christmas, write a list and stick to it. Track your expenses as you go to avoid busting your budget.
Before you buy, make sure you have a real bargain by checking prices against other retailers.
Websites such as Google Shopping as well as pricerunner.com, kelkoo.co.uk and pricespy.co.uk will help find the best price for the items you want. Remember, a discount is only worth having if the end purchase price is the lowest around.