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Thursday, January 10, 2013
The concept of making anything other than very short-term new year resolutions has never appealed. This has nothing to do with a lack of willpower: around twenty five years ago, I went from being a 30-a-day smoker to zero in one day and haven’t had a cigarette (or a craving for one) since.
I’d simply reached the point where I wanted to stop, so I did.
Nor was this decision taken in a January.
In fact, I’m puzzled why people make potentially life-changing decisions just because we’ve reached a specific point in the calendar, though if that’s your reason for packing in the dreaded weed, congratulations.
I was intrigued to learn from a solicitor friend this week that January is known as ‘divorce month’ within her firm, a time when people decide that the few days they spent with their spouse over Christmas represented the final straw.
Apparently, January is the month when the gloves come off and Post-it notes are suddenly applied to household appliances and gadgets in a colourful, if spiteful, display of original ownership.
Yet January is also a traditional time for financial planning, a month when many of us unearth yellowing documents from files, dust them down and mull over details of insurances, pensions, bank accounts and investments, all the while calculating what they’re currently worth.
Why this exercise should be a feature exclusive to the year’s first month is puzzling. If you’ve held cash in a low-rate savings account for a while, ask yourself why you’ve done nothing about it until now. The same applies to every other form of investment and saving.
My point is: why not review your finances every quarter, or even monthly?
Yes, such frequency may sound a little nerdy, although once you’ve established a regular routine, not only does the process become less of a chore, it also becomes evident that savings opportunities come calling at other times of the year, not just January.
However, there is one area of investment which definitely warrants a comprehensive review during the early part of any year. Even if you do nothing else (except perhaps transferring your savings out of bank accounts paying paltry interest rates), this is a great time to consider making as much use of your ISA allowance as possible.
Of course, the best way of doing this is to set up a standing order and drip feed savings into probably the most tax-efficient scheme available. Other people prefer to pay in lump sums.
Either way, during the current tax year an individual can put up to £11,280 into a stocks and shares ISA (or £5,640 into a cash-only version), which means that theoretically, a couple could salt away a maximum of £22,560 from the taxman.
Considering this in January makes enormous sense for two reasons, one specific, one more general.
Specifically, because as the tax year comes to an end, so savers are swamped with seductive-looking details of ISAs from institutions desperate for your cash.
However, many of early April’s attractive rates often turn out to be short-term deals. Better to avoid the bait and take a more considered decision regarding your ISA now.
From a more general perspective, it’s worth noting that current ISA allowances are extremely generous. How long politicians will be able to keep their sticky hands off as their own requirement for cash becomes ever more desperate is anyone’s guess.
With a reputation as one of the toughest people in business, many stores would shudder at the thought of getting the Mary Portas treatment.