New Year 1: Getting started with money

So here we are again, another year! Having started off with a cheerful little post on loneliness, I wanted to come back to thinking as the FIRE community, where you are definitely not alone. Whether you are new to thinking about personal finance or fully on your path, the new year offers a moment to take stock and think about where you want to be, and how you will get there.

Woop! Photo by zero take on Unsplash

Now, I don’t really make New Year’s resolutions. As my dear friend said – why add pressure? Why not just resolve to be kind to yourself, and treat yourself well? I think that is sage advice, but I do like to find tangible ways to treat myself well (and also to myself, said with love – this does not involve a cold beer and some cheese straws).  I’ve written before about how managing your finances is an act of radical self care and it’s certainly true for me.

I know lots of people find thinking about finance stressful: try imagining instead that dealing with your money is a way of reducing stress now and in the future. You might have to sit and do some tedious legwork now, but what if it meant no more sleepless nights worrying about money? What if it freed up some brain space for you to dream and act on those plans? Now that’s worth a resolution.

So my advice to you, especially if you are just getting started, is to give yourself a break. We’ve all had a hard few years, and a lot of the financial (and other) news coming out suggests that 2022 isn’t going to be a bunch of roses either. The most important thing though is to give yourself some grace and some space, not just because you deserve it but because when you are ready to work on your finances (or your weight, your love life or your novel) you will come from a place where you are more centred and compassionate, and more able to engage.

New year, same old you, but maybe with some new ideas. Photo by Sincerely Media on Unsplash

I also believe there are a lot of easier ways to cut through the white noise of financial confusion. My next few posts will cover some options as to how to knock your finances into shape for 2022, when you are ready.

There is a ton of financial guidance out at this time of year. January feels like a fresh start, plus it’s common to come out of the holiday period feeling a bit queasy about overspending, or about carrying debt into yet another year. Sometimes the advice can be helpful, but I find many of them either over simplify – “set a budget and stick to it” is a frequent gem which makes me think “oh thanks! :facepalm:” – or cram so many different things in that it can feel overwhelming.

So my new year financial resolutions are limited to the following:

  • Audit: Work out what my fixed costs are;
  • Pay myself first: Work out what I can reasonably save and ensure that it is automated to come out straight after I get paid;
  • Burn the budget: Basically, I’m not going to sweat what happens with the rest of my money. I mean, within reason.

And that’s it. Simples! Looking forward to sharing my audit process, and my own results, next week. Until then, put your feet up and finish off the Christmas chocolates. You got this.

Grace and space first: everything else will come. Photo by Nitish Meena on Unsplash

Happy new (tax) year!

In the UK, for various nefarious reasons, the tax year starts on 6th April. I love spring anyway with its sense of fresh starts, but the new tax year always feels like a great moment to take stock of where I am financially. So here’s some of the things you might want to think about whilst enjoying the start of the nice weather.

New year fun times, the financial way. Photo by Sincerely Media on Unsplash
  1. Check out your pension: The tax-free amount that you can pay into a personal pension stays at £40,000 for the 2021/22 tax year in the UK. The lifetime allowance for pension savings remains at £1,073,100 (not a problem for me right now, but good to know!). I’ve written before about working out how much you need in retirement but it’s good to keep an regular eye on where you are at.
    • Make the most of your work pension: if you have a workplace pension, check how much you are paying in and what the employer match is. Since your contribution comes out pre-tax, and hopefully you get a top up, this can often be the best option for pension planning. I pay 10% of my salary to my work place pension, and it’s a significant chunk of my monthly savings.
    • Check out personal pension options: If you don’t have a workplace pension you might have done this already. The most tax efficient way to do this in the UK might be a Self Invested Personal Pensions (SIPP). I have a SIPP with Fidelity, invested in low-cost index funds. At the start of the tax year, I check the investments and if needed rebalance the percentages across the various different funds.
    • Check your state pension projection: If you’re in the UK, check your national insurance contributions and what it means for your state pension. You shouldn’t need to do this every tax year but just putting it out there as a reminder!
Happy financial spring cleaning 🙂

2. Check out your investments. Depending on where you are in your financial journey this could be lots of things, from opening up your piggy bank (thought note, this is not investing!) to reviewing your enormous portfolio. The ISA is a brilliant tax wrapper for UK residents, and comes in lots of different types: cash, stocks and shares, junior. The tax allowance for 2021-2 is £20,000 per person, and you have the tax year to use it since it can’t be rolled over. For me, I have all my investments in a stocks and shares ISA – there are places you can compare the S&S ISA options. At the start of the new tax year I check my investments, and rebalance them if needed. I also check my monthly ISA contribution to try and make the most of the personal allowance – to use up the personal allowance would take £1,666 per month.

3. Set up your financial plan for the year. You might have done this in January, which is when I do my goal setting and overall planning, but because of tax returns, I keep my spreadsheets from April-March, and have a lovely time at the start of April setting them up for the new year.

4. Get ready for your tax return. Ok, you don’t need to start work on it right now but it’s good to get things (receipts, invoices etc) together ready for the fabulous time to come.

So – what are your rituals for the new tax year? Would love to hear from you!