The start of a new year is the perfect time to get your finances in order.
It can be difficult to face up to monetary mistakes or have the courage to take an honest look at outgoings, but getting everything in order from the get-go will actually help in the long-run.
So pour yourself a cup of coffee, grab a pen and notebook (or create a fancy spreadsheet, if you prefer) and let’s get started – here’s everything you need to know to get your finances back on track for 2020, month by month.
Deep breath.
January
Self-employed? File your tax return by 31 January or risk penalties
‘If the clock’s ticking towards the 31 January deadline, and the pressure is on to submit your online self-assessment tax return, the first option is always to try and get it right first time, on time,’ Mike Parkes from GoSimpleTax, tells us.
‘However, in reality, this is not always possible. So, should you opt for on time with the chance of getting your return wrong, or taking your time and getting it right, after the deadline passes?
‘Our advice is always the former. HMRC has penalties in place for those who fail to meet the timescales set out. These include: an automatic penalty of £100. If you’re three months late, they will then charge you a daily penalty of £10, up to a maximum of £900. If you’re six months late, the fine is £300, or 5% of the tax owed, if this is greater.
‘After 12 months, they will penalise you another £300, or 5%, and, in exceptional circumstances, 100% of the tax due.
‘Under the current system, HMRC will allow you submit your tax return and then make a resubmission before the next filing deadline of the year after. For example, if you’re submitting your tax return on 31 January 2020, you have until 31 January 2021 to amend anything you need.’
If it’s your first time and you’re unsure on how to proceed you can call HMRC for help. Or make the process easier by hiring an accountant. There are online services such as TaxScouts who put together your return for a small fee.
Create a budget for the year ahead
‘Your biggest win in 2020 will be to make a budget and track it,’ says Salman Haqqi, personal finance expert at money.co.uk.
‘Knowing what you’ve got coming in and going out each month is key to getting your finances in order. With Open Banking you can use third party mobile phone apps such as Yolt or Tandem that track your spending and send you a notification every time you use our debit or credit card, helping you stick to your budget.
‘Quite simply, if you’re spending more than you’re earning, then you have a problem. The good thing is once you’ve worked this out you can do something about it.
‘Give yourself a pay rise by scheduling time each week to look at your finances. Make sure you’re switching to credit cards, savings accounts and providers for gas, electricity and insurance that cost you less on a regular basis.
‘Set reminders in your diary for all the services you use to prompt yourself to shop around a week before they come to an end. It’s really important to avoid the dreaded “auto-renewal” which will almost always cost you more.’
Take an honest look at your living costs and monthly bills – rent, insurance, gas, internet, the lot – as well as travel costs (consider if it’s cheaper to commit to a yearly or monthly travel card going forward) and any upcoming trips, birthdays or weddings that you’ve got in the diary and might need more money for. Then, pop it all in a spreadsheet.
Work out if there are better deals out there for you. Could you replace the weekly food delivery service with a cheaper alternative? Do you really need both a Netflix and an Amazon Prime account?
Salman recommends tracking your direct debits as well, to ensure that you’re not being charged for services that you’re no longer using.
Use your ISA allowance and boost your pension pot
‘The end of the tax year (April) is fast approaching,’ says Deborah Vickers, personal finance expert and channel director at moneyguru.com.
‘This is the home straight. If you haven’t already done so, it’s best to utilise your ISA allowance. If you have spare cash to save or invest, put it in your ISA.
‘Pension contributions can be one of the most tax-efficient investments for most people – you can pay up to £40,000 per year (including contributions from your employer).
‘Take steps to maximise your pension pot – if you have used your pot, you can carry it forward three years.’
It may also be worth consolidating your pension accounts into one account to earn better rewards (some companies will add more on top as a bonus for you putting money into the account).
Even if you’re just setting aside a few pounds per week for your pension, it’s better than nothing at all.
February
No council tax
Hurrah, there’s some good news – you get a council tax break in February and March, meaning you can use this money for other fun things (or open up a savings account, perhaps?).
Taking the next step with your Valentine? Be smart about it
‘As the way we live evolves so must our financial planning to make sure that loved ones remain protected,’ Shona Lowe, private client and corporate director at the financial planning service, 1825.
‘For couples who live together but are not married this is even more important. The reality is that the rules around tax and the distribution of our assets are wholly geared towards married couples. Writing a will, updating it regularly as circumstances change, and checking how joint assets are held are just a few simple steps to help get finances in order.
‘For more complex matters, such as estimating inheritance tax liability or understanding capital gains tax it’s always best to seek the advice of financial planning expert.’
If you’re planning on getting hitched, consider getting a prenup to protect your assets, too. It may not be romantic, but it’s definitely smart.
Are you in debt or worried that your partner might be financially unstable? Here’s a guide on how to talk to your partner about money.
March
Start planning for Christmas spending (yes, really)
‘If you’re somebody who leaves saving for Christmas right to last minute, or you simply rely on your December paycheck then leave yourself short, it would be a really good idea to start a Christmas savings pot around spring time, says Holly Andrews, managing director at KIS Finance.
‘You may think this sounds very early, but it means you don’t have to save as much every month as it has longer to build.
‘If you start a pot in May and add £20 every month, for example, you will have £140 saved by the end of November. Of course you can save more or less per month, or start the pot earlier or later in the year, depending on what you can afford.’
You could also set yourself a money challenge; we’ve put together a nifty fiver savings guide that could help you put away £6,890 by the end of 2020.
Those who have less of a budget to play with can also try the week-by-week challenge, which leaves you with an additional £1,456 in the savings account.
Write a will
Death cleaning, as the Swedes call it, might sound terrifying – but having your affairs in order could make you feel calmer about the undeniable fact that you will one day leave this Earth (sorry for the downer, but it’s true).
And while it can be terrifying to think about, having a will in place helps those you leave behind and gives you the comfort of knowing that they have your final wishes and instructions.
In March, there is campaign called Free Wills Month, a service that offers those aged over 55 the change to create or update an existing will for free.
‘Take advantage of Free Wills Month in March to tackle that admin task that never makes it to the top of the “to-do” list,’ says Mona Patel, consumer spokesperson at Royal London.
‘Having an up-to-date will is incredibly important not just to protect your finances but to make sure vital decisions, such as who will look after your children, are noted.
‘Free Wills Month offers people aged 55 and over the chance to write or update their will free of charge with selected charities.’
April
Consider using technology to make next year’s financial processes easier
Do you always find yourself in a pile of paperwork at the end of the tax year, stressed out about it all?
Start 2020 fresh by looking useful apps or online programmes that let you better organise your finances, as well as read up on HMRC processes.
There are lots of free services like CloudBooks or Wave, but do some research to find the system that suits you (so that you actually end up using it, and it’s not a waste of your time and money).
‘As the end of the tax year approaches, many of us will be looking forward to starting a clean slate and the opportunity to consolidate and prepare for the financial year ahead,’ Dan Stopp, UK accounting manager at Bokio, an AI-based accounting startup, tells us.
‘Familiarising yourself with any new HMRC tax regulations, and using bookkeeping software is a couple of good ways to help you stay on track and improve your tax efficiency in the 19/20 tax year.’
The new tax year begins on 6 April.
May
There’s not a whole lot happening in May, so give yourself a well-earned break from financial stress.
You could also take this time to review your progress over the past few months.
June
Teach your kids about the value of money
‘June marks My Money Week in schools throughout the UK, a chance to reflect on what financial education we are providing our young people,’ says Russell Winnard, director of programmes and services at Young Enterprise.
‘Many of our children have grown up thinking of spending as the tap of a card rather than the transfer of cash, yet in this changing world where it is easier to fall into debt than ever, we are still not giving them sufficient financial education to make more informed financial decisions in adulthood.
‘My Money Week is a particularly good time to talk to your children about spending. Why not encourage your children to help you budget for your shopping, or use cash when you are out together to teach about the value of money?
‘These small measures at a young age can have a big impact on their confidence and responsibility when it comes to handling finances in adulthood.’
- Stick to your budget
We know it’s tempting to ignore the budget you set out in January, especially when the pub gardens are calling your name, but remember that you set yourself those goals for a reason.
If you can afford it, spend the cash but consider cheaper alternatives where possible so that you can stay on track. A tinny in the park with your mates is much more affordable than rounds at the bar.
July
Your second self-employed tax payment is due
‘It is important to note that when budgeting and trying to manage your cash flow, you will need to pay your second payment on account in July,’ says Dan.
‘As per the first payment on account, this is half of your previous years’ tax bill meaning that in the following January, you need to pay the difference between the last two years tax returns.’
Find deals for the school holidays
‘Research shows that the average family spends an extra £126.27 per child per week during the school holidays,’ according to Mark Bodega, CMO of Neyber.
‘So, while days out for the family are a great way to stay active and create memories together, making savvy savings along the way is paramount.’
If money is tight, look for cheap deals on sites like Groupon or free activities that you can enjoy with the kids, like the Victoria & Albert Museum of Childhood, which showcases children’s toys from the 17th century to present day.
August
Working parents, don’t miss out on funding for childcare
Are you the working parent of a child aged three to four years old? Apply for free childcare.
According to the National Day Nurseries Association, you can get 30 hours per week during term time or 1,140 per year (around 22 hours per week).
The deadline is 31 August, though HMRC recommends getting it sorted by 31 July if possible.
September
Sort out next year’s school fees
‘For parents who are looking to the bank of grandma and grandad for help with school costs, the answer could be to set up a discretionary trust,’ says Shona.
‘Grandparents can gift up to £325,000 each into a trust with no upfront IHT [inheritance tax] to pay as long as they live for seven years after this.
‘School fees can be paid directly to the school, so nothing for the parents to do, and as long as there is enough money in the fund it can also be used to support other activities. So grandparents can also help with sports costs, gap years and ultimately university fees.
‘Discretionary trusts do typically come with higher tax charges when compared with alternatives, but these are often seen to be worth it for the extra flexibility they provide.’
Dealing with credit card debt?
Debt can be daunting, but try to face the issue head on.
‘If you’ve got a load of expensive credit card debt, you could look at getting a 0% balance transfer card,’ recommends Tom Martin, money expert for the money-saving app, Chip.
‘The best times of year to get 0% credit deals are usually January and September, when banks compete to get to the top of the comparison tables.’
Worried about your credit score? We’ve got you covered with a guide on how to improve your rating.
October
Register for self-assessment (5 October) and file (31 October)
‘Whilst it may seem like a long way off, this early October deadline comes around fast and often catches people out!,’ says Dan.
‘If you have self-employed income between 6 April 2019 and 5 April 2020, you must register by 5 October if it is your first year of trading. People often forget that they actually need to register, and instead only focus on the 31 January tax deadline, a common and costly mistake.’
Those who want to do a paper tax return have to do so by 31 October, but this cuts your deadline by three months, something Dan doesn’t recommend doing.
He says: ‘This is something we strongly advise against because it reduces your deadline by three months and also makes it much harder if you need to make any amendments.
‘It is also much more user friendly to transfer figures from your accounting software to the online tax return than completing the paper return.’
Then again, if you like to be out early or prefer putting pen to paper, it’s always an option.
Those who own a limited business will also need to pay their corporate tax bill by 1 August.
November
Black Friday is coming up on 27 November
This is the perfect time to nab Christmas presents at a bargain or get that fancy TV you’ve been saving up for.
You can also score great deals on phone contracts and holidays, and other everyday costs.
Just don’t overdo it and be sure to read the fine print.
December
Review your progress
As 2020 comes to an end, it’s time to look at what’s gone well – and what you need to work on for 2021.
Did you manage to do a money challenge? Did you sort out better deals for your outgoings? Did you hit all the deadlines and avoid fees?
Even if you didn’t reach all your goals, give yourself a pat on the back for trying your best – and treat yourself to plenty of mince pies and mulled wines.
Christmas is here… don’t panic
Hopefully, you started saving up for the festive holiday in March, as recommended – but if you haven’t (or had to use the cash on something more urgent), that’s OK.
Christmas can be a stressful time, with many people feeling the financial strain but don’t get yourself into debt over it.
Instead, talk to your family and friends and explain that you’d rather keep the festivities smaller this year.
Or do a potluck Christmas dinner. Or make your own presents. Or scour charity shops and supermarkets for more affordable options.
Having less money doesn’t mean you can’t still enjoy this time of year.
MORE: How to talk to a partner about debt
MORE: Save £1,378 in a year with this bingo money challenge
MORE: Try our 2020 fiver saving challenge to put away £6,890 by the end of the year
source https://metro.co.uk/2020/01/27/get-finances-track-2020-month-month-calendar-12048736/
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