Are you guilty of ‘financial drift’ by not taking stock of your financial position? Hopefully not if you are using Legal & Medical services. Earning money is hard and keeping hold of it is even harder, so we need to make sure what we earn is working efficiently. Start each year by giving your money matters a financial health check with our five simple, quick and achievable tips on how to save money and help you achieve financial wins.
1. Make use of tax shelters
Most will feel you pay more than enough tax. You have little or no choice in the matter. However, the HMRC are not prescriptive when it comes to making you use tax breaks. The most effective and easiest way is to utilise your available annual £20,000 ISA allowances (and LISA when appropriate).
As we accelerate towards the new tax year on 6th April, if you haven’t already started using this year’s ISA allowance, you have the golden opportunity to use this tax year’s allowance, as well as next years and save £40,000 each into a tax-efficient environment.
If you have children under the age of 18 in the family, you also have their £9,000 allowance each per tax year to take advantage of. So, a family of 2 adults and 2 children with a chunk of money sitting without a tax-free wrapper could move a whopping £116,000 into a tax-free environment before the end of April this year!
Granted, not everyone will have that sort of capital in the bank. If you don’t have capital, yet you do have some money left over each month, why not try saving it on the same day you get paid? If the money has already left your account, you are less likely to spend what you can’t see.
ISAs can quickly become a good habit, and one your future self (and family) will thank you for.
If you feel consciously incompetent about ISAs take a look at our recent article for a quick guide: Tax Planning for Doctors and Dentists
2. Check your payslip
Do you regularly check your payslip? There are several common errors that we come across when reviewing our clients’ payslips. This simple piece of housekeeping can ensure that you are paid correctly and not have to go to battle with your trust or HMRC wasting valuable time. Have you fallen foul of one of the following?
What is your tax code? The most common tax code is 1257L, which states the person is entitled to a personal allowance of £12570 for the 2022/23 tax year. There can often be issues when people move jobs as the new employer does not have the correct tax codes. If you are unsure, a quick google search may help you understand your tax code.
Are you on the correct pay scale? This error typically happens as a junior doctor moves between trusts, but consultants are not immune. Your pay scale will show on your payslip and can be checked against the NHS pay grades which can be found online.
3. Are your savings lying dormant?
With inflation measured by the Consumer Prices Index (CPI), running at 10.7% in the 12 months to November 2022*, while the best interest rate offered by an instant access savings account in December 2022 was 2.85%**. In practice, the difference between CPI and cash savings rates is often vast, as many of us receive interest rates far below the heady heights of 2.85%. Often new accounts offer the most attractive interest rates, while older accounts are left dwindling, gathering dust with tiny interest rates on offer. So, checking your accounts and switching to accounts offering better rates of interest could be an easy win.
If you have built up a sufficient emergency fund, maybe it is time to consider investing. You could couple this with starting to use your ISA allowance to be really tax efficient.
4. Review your mortgage deal
Mortgage rates rose significantly throughout 2022, but in recent weeks, we have seen a significant slowdown in the rate increases, and in many cases some rates are now starting to come down, although nobody can predict how long this will last.
If you haven’t reviewed your mortgage for a while or are due to come to the end of your current deal in the next 6 months, there is no better time to review the mortgage options available to you and see if you can save significant sums. One of our mortgage advisers would be happy to assist.
We understand the sometimes unusual ways doctors and dentists are paid, and have many years of presenting this to the most suitable lenders. Whether you are remortgaging your forever home or just embarking on your first purchase, we can help.
Remember, your home may be repossessed if you do not keep up repayments on your mortgage.
5. Financial health check
Ask yourself, “What is the most important thing in your life?” The answer is invariably one’s own health and that of their family. Staying healthy is one area we cannot all take for granted, so it seems only sensible to ensure you and your family are protected in the event of ill health.
Now is a good time for a refresh! Especially, if you have recently changed jobs, passed through an increment, moved house, got married or have had children – all these factors will impact your current protection policy. Also, if you haven’t checked your policy for a long time, many have evolved – an upgrade could save you money! Make it even easier on yourself by calling your adviser, as they can do the heavy lifting for you!
Many protection policies now include children’s cover for free in case the unthinkable illnesses happen to our little ones. We spend time each year looking around for the best car and house insurance. Afford at least the same care for the protection that will support your family if you die or fall seriously ill.
As you can see, a simple financial health check could save money and possibly make you some. Finally, you may find our new budget management tool useful – it’s free via our client portal.
The concepts and suggestions in this article must not be viewed as advice. As always, we recommend you approach a financial adviser who will take your full circumstances into consideration before providing advice.
Are you guilty of not checking if your money is working hard for you? Let us know by leaving a comment below.