Contributed by Norbert Fullerton, Actuary & Financial Consultant
The first few months of the calendar year can be the busiest, as savers and investors look to sort out their finances and maximize investment gains. Below, is the first in a series of tips where I outline some steps people can take to maximize returns in 2013.
Ingredient 1: Spend within your means. This is easier said than done. However, as my mom used to tell me as a kid, “If you don’t have it, don’t buy it”. Essentially saying that if I didn’t have enough money to purchase the goods or services I wanted, then wait until you can afford it. In this day and age of easy availability of credit, and the pressures to buy something new – a new car, house, clothing, gadget etc, it’s easy to forget that simple principle. Simply do a budget, keep track of your income and spending habits and stay within your means.
Ingredient 2: Switch to a better bank. As many of us are aware, savings rates vary from bank to bank. There is little incentive these days to stay with a bank forever just because they were kind to you some time ago. Review the rates in the market periodically. Customer service is very important too, so don’t just switch to a bank with a marginally higher savings rate but with a poor track record at keeping their customers happy. Sometimes, even if the interest rate on cash is the same at another bank, switching to benefit from better customer service will pay dividends in stress-free banking. Look out too for any “bonus rates” that come to an end. Savers who opted to put their money in a bonus rate account should note the date that the bonus runs out, as many accounts offer poor returns thereafter.
Ingredient 3: Exploit tax exemptions and reliefs. You may need a tax adviser for assistance with complex tax arrangements. For example, you can spread the proceeds of a sale of an investment over two different tax years, to utilize separate annual capital gains tax allowances. Experts recommend transferring some or all of your assets or investments to your spouse to make use of both of your tax reliefs.
You also don’t need to be a rocket scientist or actuary to figure out that it is better to save or invest first in vehicles that benefit from tax-free or lower tax rates. The simplest savings and investment vehicles are often the best.
What is your money management recipe? We invite you to share your ideas in the comment box below?
Investors should take advice from their own independent advisor(s) before making an investment decision and should be aware of local laws governing investments. Neither the author nor any other person or unit belonging to Food for the Soul, nor any of its officers, directors or employees accept any liability or responsibility in respect of the information or any recommendations expressed herein. Remember, the value of your investment and the income from them may rise or fall and is not guaranteed. You may not get back the amount originally invested. Past performance may not be indicative of future results.