New Year resolutions to boost your bank balance
FINANCIAL EXPERT WARREN SHUTE, AUTHOR OF THE MONEY PLAN, TELLS YOU HOW TO GET YOUR FINANCES IN SHAPE FOR 2019
OWN my home and have savings. And I know all must one day die. Putting the two together means inheritance tax. So when I saw an advert offering ‘an eight-step solution’ to the tax with a free book, I was tempted. I didn’t apply because those offering the book demanded personal details including phone numbers. I have sent the link. What do you think?
AINHERITANCE tax can take 40% of all you leave over £325,000 – including property, savings, investments (taxed or tax-free), furniture, clothes and cars
A number of schemes claim to reduce or abolish this tax liability. Some demand large sums up-front for illegal plans, others, equally pricey, produce ideas which may be legal now but could be ruled illegal in the future. You probably won’t get a refund or compensation.
You can give away property and other items, and providing you live for seven years after the gift, that becomes inheritance tax free. But you can’t give your home to your children and continue to live in it unless you pay rent (which will be taxed – and they could be hit for capital gains tax when they sell).
The link you sent is worrying because it takes thousands of words to say very little – a feature of some unpleasant online schemes. But the small print shows the intention. There are inheritance tax let-outs for certain unquoted shares – the idea is to allow small businesses to be passed on.
Asking for the booklet gives them permission to phone you with offers of high-risk shares. The small print also reveals they may already own these shares, so their advice would be biased.
You can reduce tax bills with charitable donations in your will, giving wedding presents to close family, and making certain regular payments to dependants. You can also give amounts up to £250 and you have a £3,000 a year tax-free give away as well – figures not updated for nearly 35 years. And anything you leave to a partner (marriage or civil partnership) is tax-free until they die.
Inheritance tax is complex. You need a valid will. And it’s best to seek real independent advice. T’S a New Year, and I bet that for most of you it’s not only your head hurting! Your wallet has probably taken a beating too.
My message to you is – don’t panic. I am going to show you how you can make some quick wins to help not just for now but for the rest of the year.
To avoid the January financial blues I am going to ask you to get financially organised using what I refer to as my Bank Account System, as well as giving you some ‘quick win’ money resolutions.
My BAS is a system that automates your money as much as possible, taking emotion out of everyday financial decisions and giving you control over your yearly spending.
HERE’S HOW IT WORKS:
ARRANGE all your regular payments, standing orders and direct debits to come out of your bills account – which is also where you keep your incoming money.
Go through each payment and ask yourself three things : do I need this, do I want this, can I get it cheaper elsewhere?
Act accordingly; you might be surprised at how much you can save.
WAM is your weekly Walkabout Money, and it pays for all your variable spending and fun: beer, coffee, haircuts and so on.
Work out how much you want (or have) to spend in a month after your outgoings, divide it by four, and you’ll get your weekly WAM.
Set up a weekly payment for this amount from your bills account to your WAM account. Make it happen on a Wednesday, because once it’s spent, you don’t have too long to wait after the weekend, which is when most of us spend our cash.
Your WAM is your weekly allowance; it’s finite. DON’ T dip into your bills account for more, or use credit cards if it runs out, it’s not too long to wait for the next Wednesday!
THE QUICK WINS:
GO through your house and gather together all of the presents you don’t want. Search online to see what you may expect to sell them for. Two good sites are ebay.co.uk and Facebook Market. “NEW YE AR A New Healthy You” – time to make the resolution to go to that expensive gym. But think before you sign lengthy contracts and read the small print.
Are you really going to go? Are there other ways of keeping fit that are cheaper and don’t
involve contracts?
IDENTIFY five financial feasible goals that you want to achieve in the New Year, and write them down.
Writing down and clarifying your goals will motivate you to take the steps to achieve them.
Be specific. Avoid vague resolutions like ‘pay off debt’ or ‘spend less money’.
IF you spend an average of £4 a day on a Prêt lunch, you would be spending approximately £880 a year. Resolution – make lunch at home
THINK of one habit you need to break that won’t break you. If you buy a latte at Starbucks on the way to work each day you could be looking at spending £605 a year. Resolution – take your own coffee to work in a flask.
MARRIAGE Allowance lets you transfer £1,190 of your personal allowance to your husband, wife or civil partner – if you are a non-tax payer and they are a basic rate taxpayer. This can save you £238 a year in tax (April 6 to April 5 the next year). MAKE your top New Year’s resolution to save more and spend less. A great way to achieve this goal is to set a weekly allowance and stick to it. To avoid overspending on your everyday expenses, pay yourself a weekly allowance for all your variable expenses, and once it’s gone, it’s gone.
CU TTING out booze for January is becoming normal, and can save a few quid.
But cutting it out for a full year can save far more. Figures from Macmillan Cancer Support show that the average Brit spends £787 a year on alcoholic drinks – enough for a new iPhone, Mulberry tote bag, or a top football club season ticket – with 1.3 million spending more than £2,650 a year.
REMEMBER the cash back sites. Both topcashback.co.uk and quidco.co.uk offer you cash back on certain purchases. It’s definitely worth a search as the pounds can add up quickly.