January 2003

FINANCIAL PLANNING, THE KEY TO A PROSPEROUS NEW YEAR

Tis the season to be jolly, to spend money and think long and hard about next year’s personal financial planning. Aberdeen based Acumen Financial Planning Limited takes a seasonal look at the financial considerations and opportunities that can help pave the way for a very prosperous New Year.

Make A Wish Come True
There are no guarantees in this world, but one thing is for sure, nothing will happen to improve your life or your finances unless you wish it to. Take a day’s leave around the time of your birthday each year and use that day to plan the rest of your life. If you need help on the financial side, fix a time with a qualified Financial Planner who will help you plan ahead.

Retail Therapy
Make a list of items you need to purchase during 2003 and go see if you can find those items on sale in January at a large discount to normal retail price. Provided you do not succumb to impulse buys, this is a win-win strategy – you get what you want at bargain basement prices, and the retailer has cash to re-stock with items to sell at full price later on in the year.

Season of Goodwill
Are you aware that there are several tax effective ways to make gifts to your favourite charity or good cause? Put simply, you select a charity (not your kids!) and whatever you pay will be recorded by the charity in a way that will enable them to top up your payment with an additional payment from the government. This works every time, irrespective of how you voted at the last election.

Wheel of Fortune – Don’t You Believe It
Is your employer due to change or upgrade your car this year? Remember that the Government has decided to tax you on the use of your company car based on emissions. If cars are not that important to you, you may wish to select a model with low emissions or even supply your own car and claim an allowance from your employer in order to reduce tax payable out of your hard earned income.

How About a Pair of Scissors For Christmas
Ok so you’ve shopped till you’ve dropped, and the plastic has almost melted. Do you know what interest rate you are charged on unpaid balances? Some are in excess of 20%, so pay them off as fast as you can. Or find a credit card provider who will charge you a low rate on a transferred balance for say a six month period until you find your feet. Alternatively, mortgage rates are at an all time low with the money markets indicating that the next move may be upwards. If your house is worth considerably more than your mortgage and you have expensive credit cards and loans why don’t you consider consolidating all your debt? Why not consider a fixed rate deal? Most lenders have special deals on re-mortgages which would reduce your monthly outgoings and these in turn could be re-directed into the mortgage to reduce the term of the mortgage. And use your new scissors to cut up those cards.

Give Your Spouse a Gift
If you have excess cash and are able to give your spouse £2,808, The Chancellor Gordon Brown, will top this up by giving tax relief of £792 if the funds are paid into a personal pension. Your spouse does not need to have any earnings and you can do this every year up to age 75.

Benefit From This Year’s Good Habits
Did you give up smoking more than 12 months ago? An option now you are a non-smoker is to review your protection needs and explore what is available in the life assurance market place to suit your current requirements. Consider using your current level of expenditure or a modest increase to improve your protection or even add protection which you currently don’t have. You may now be able to effect protection that you required to have in the past but could not afford.

Benefit From Next Year’s Good Habits
Do you intend to quit smoking as part of your New Year resolutions? If so you may be surprised to know that after approximately a 12 month period of non-smoking, you could be eligible to up to 46% reduction on life assurance premiums. This reduction may be available on protection policies that you already own. Furthermore if you maintain your current level of premiums you will be able to increase or improve you protection without increasing expenditure.

Now You See it Now You Don’t
The life assurance industry is changing at fast pace. Because of this, premium rates are decreasing and certain types of guaranteed Critical Illness policies may soon no longer be available .If you take action now you may be able to obtain this type of valuable protection before it disappears.

Look Backwards, Then Forwards
If you have Personal Pensions and have not contributed the maximum allowable, 31st January is the last date you can carry back to the previous tax year to "mop up" any unused tax relief. Failure to meet this deadline represents an opportunity lost. Consider looking back this New Year before you look to the future.

Selection Box Empty?
Becoming increasingly concerned with press comment concerning pensions? When considering a comfortable retirement, pensions should be seen as only one part of your overall planning. To spread your risk you should also consider a selection of investments including saving into an ISA and perhaps purchasing a rental property. Look at re-filling your Selection Box after Christmas this year and bear in mind the deadline for pension and ISA contributions for the current year is 5th April.

Hot Date
Whilst you may still have to clear your head following the festive celebrations there is still a hot date to prepare for. The self assessment tax returns deadline for 2001/02 is on 31 January as are payments on account for the current tax year with both income tax and NIC payments needing to be paid. In addition, anyone who was lucky enough to make a disposal of assets/investments for profit in 2001/02 needs to pay the capital gains tax due by the 31 January. If you miss this date the Inland Revenue will not accept flowers as an apology.

Don’t Watch Your Family Struggle
Let us suppose you are a grandparent and you know that on death, your estate would be subject to Inheritance Tax. Let us also suppose that your son or daughter is struggling financially with mortgage payments and your grandchildren’s school fees. You could arrange for your grandchild’s school to bill you and in doing so would take the pressure off your family and reduce Inheritance Tax that will eventually pass to the Inland Revenue on your demise.