A pre-Christmas money checkup
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.
December is often a difficult month, financially, for households. Not only are expenses higher due to Christmas spending (which can run into the £100s), but January is also a 31-day month; meaning it can feel like a while before your next pay cheque. It’s easy to see, therefore, how many families end up in their overdrafts or falling into credit card debt.
This is often the situation in a typical year. In 2021, however, the UK population faces higher costs due to increased energy prices and rising inflation in the wider economy. This is likely to put households under further financial strain, without careful planning. In light of this, our team at Castlegate wanted to offer some ideas this November to help provide peace of mind this Christmas.
We hope you find this content helpful. If you want to discuss your own financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:
01476 855 585
Have an energy plan
The UK energy price cap set by Ofgem was already raised to £1,277 a year from 1st October – with warnings that this could increase by a further 30% by April 2022. Many UK energy suppliers have already gone bust, with more expected to follow, leading to households needing to change suppliers (where the new cap is likely to produce a higher bill). Whilst there is nothing you can do about this situation, there are ways to ensure you keep your energy consumption within reasonable limits during the colder festive season ahead.
A good starting point is to make sure idle appliances are always turned off, and that devices like mobile phones are not left to charge overnight. You may also wish to turn down your thermostat or even invest in a smart thermostat, as turning down your heating just one degree could save up to £80 per year. You could also try washing clothes at a lower temperature.
Do not neglect savings and pensions
When short-term money pressures loom, it can be tempting to pause your savings and pension contributions to try and free-up some income. Be mindful that if you do this in one year, you are more likely to do this every year – potentially for a long time. This adds up to a lot of lost wealth growth, since less money is able to benefit from the power of compound interest. Lowering your pension contributions, moreover, runs the risk that you may forget to raise them back up again in the new year. This could undermine your retirement goals and lifestyle in the future.
Review your protection
Christmas is often a busy time, but can also offer the opportunity to rest and gather our thoughts for the year ahead. This can present a good time to review your financial protection and ensure your household can maintain stability, should tragedy strike. In particular, take time to check that your emergency savings are accessible and adequate (i.e. covering 3-6 months’ of living costs). You may wish to check your will and also any life insurance policies, ensuring these are fully up to date.
Check your annual allowance
Each year, you are entitled to put up to £20,000 into your ISA(s) and generate interest, capital gains and dividends tax-free. However, many people do not take advantage of their allowance and discover, near the end of the tax year (April), that it is no longer feasible to maximise it. Bear in mind that after the 6th April any unused ISA allowance is lost. Christmas is a good time to review whether you are on track to make full use of it.
Other allowances also expire at the end of the financial year. These include your capital gains tax (CGT) allowance, which lets you sell up to £12,300 in profits (e.g. from shares), outside of your ISA, tax-free. Again, Christmas can present space and time to reflect on your investments and come up with ideas to discuss with your financial adviser in the new year. If you are married or in a civil partnership, moreover, then consider discussing each of your allowances with your spouse. Remember, if one of you is likely to not use their full CGT allowances by the end of the tax year, but you are, then an asset transfer could be a good way to save on tax.
Conclusion & invitation
If you are interested in discussing your own financial plan or protection strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
01476 855 585