The transition from winter to spring tends to bring with it feelings of promise, hope and renewal. With the cold weather largely behind us, the days are getting longer, and flowers and trees blossom.
Research suggests that our mental health improves at this time of year because dopamine – an important neurotransmitter nicknamed the happy hormone – increases with exposure to sunlight. Our circadian rhythms – the natural, internal processes that regulate the sleep-wake cycle – also change with the seasons as we wake up to natural light. And our energy levels remain higher over the course of the day.
As a result, it’s also a time when you may feel the urge to clean your home from top to bottom. It’s an age-old tradition that is mirrored around the world, including Jewish customs at Passover and those for the Iranian holiday of Nowruz (i.e. the Persian New Year), which coincides with the first day of spring.
It’s also the perfect time, in light of a new tax year in the UK, to pay attention to your finances. The longer hours of daylight allow you the time to reflect and you have the opportunity to decide if your plans are achievable or if they need to be adjusted.
Finances were also called into focus by the Spring Statement from Rishi Sunak, the chancellor of the exchequer, on Wednesday 23 March. This included:
- Measures to address the spiralling cost of living as the latest figure for inflation reached a 30-year high of 6.2% in February. And the Bank of England has not ruled out the possibility of double-digit inflation and even higher prices – particularly for food and fuel – as the year progresses, not least because of the Russian-Ukraine war and the commodities impacted. Alongside measures to help the poorest households, the chancellor announced an immediate 5p a litre cut on fuel, which will run until March 2023.
- Larger national insurance payments for families. Here, the planned 1.25% increase, known as the health and social care levy, was neither abandoned nor delayed. Instead, the threshold for paying national insurance contributions was raised by £3,000, meaning people can earn up to £12,570 before they need to pay any income tax or national insurance. This change, however, will only take effect in July.
- The promise of a cut in the basic rate of income tax from 20% to 19% before the end of the current parliament in 2024.
But what should you be considering when reviewing the health of your own finances this spring? Here’s our list of five areas for focus.
1. Get your documents in order
First things first, are you on top of all of your financial paperwork? Are all your official documents – wills, lasting powers of attorney and birth and marriage certificates – together in a secure place where they can be easily found by you or the rest of the family, when necessary? If you don’t have a will, or you have one but it’s not up to date with your current circumstances, this should be a top priority. Important digital assets may also need a review.
2. Bills, bills, bills
Given we know all too well that the cost of living is rising – and fast, use this as a prompt to sit down and evaluate all your incomings and outgoings. Are you paying for services or subscriptions that you don’t use? Are there areas that you could cut back on? Do you perhaps need to free up some cash to put towards your financial goals?
3. Death and taxes
Regardless of what’s in the Spring Statement, it’s vital to always keep an eye on tax. Are you taking full advantage of any possible tax allowances you are entitled to? Are you using your annual ISA allowance, or indeed all of your allowances, exemptions and relief? Are you claiming tax relief against charitable donations and professional subscriptions?
The pandemic made many people aware of how fragile life can be, which saw them turn their attention to topics such as lifetime inheritance tax planning. Strategies here range from gifting out of regular income to the use of insurance, to help cover your family’s inheritance tax bill.
It is also worth noting that tax is a very complex area and, as such, you should always seek professional advice based on your own circumstances.
4. Planning for future possibilities
Do you have overarching financial goals, and if not, should you think about setting some? For example, do you have an idea of what you want to pass on to your children or even grandchildren? Perhaps you’d like to incorporate philanthropy into your wealth plan?
If you’re unsure where to start, map out some short, medium and long-term goals. Where do you want to be in 15 years’ time in terms of location, property-ownership, savings and employment – and are you on track to achieve this? If not, think about seeking professional guidance on whether your investments are working as hard as they could be.
5. Looking at the bigger picture
The start of the conflict in Ukraine prompted many to revisit some of the changes considered in lockdown. Have you, for example, dreamt of living somewhere else – escaping the city, for example, or being closer to loved ones? Why not revisit this desire and assess whether you have enough balance in your life. You might want to simply consider, as scary as it can sound, if you are as happy as you could be, or if changes could be made to improve your quality of life.
Examining many areas of your life – from finances to family matters – can feel daunting, and it can be hard to know where to start. But sitting down and asking yourself some tough questions will almost always pay dividends in the long run.
For help and assistance in any of these areas, please get in touch. We have an experienced team of planners and relationship managers on hand, who would be very happy to assist you in developing a personal wealth plan that can help you, and your family, achieve your financial goals.
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Investment values can go down, as well as up, to the extent that you might get back less than you originally invested. The value of your investments may also be affected by exchange rates. The inclusion of any investment structures and wrappers is for information only and should not be taken as advice or a recommendation. You should seek the necessary advice, specific to your circumstances, before making any financial decision.