Festive spending and a longer gap between pay cheques can make January feel difficult at the best of times. This year, we’re also coming off the back of a long period of steep price rises, which have squeezed incomes even further.

Recently, we have seen some better news on that front. Inflation eased to 3.9% year-on-year in November1, mortgage rates have reduced slightly and the cut to employee national insurance (NI) contributions came into effect on 6 January. For an average employee earning £35,400, the NI reduction will result in a £450 tax saving in 2024-252. But while this may ease the pain a little, other allowances have not gone up, meaning many of us are still paying more tax than a couple of years ago. Keeping your financial plans intact could feel a bit harder than usual this month.

The good news is that there are plenty of ways to get back on track and survive the January ‘money hangover’. From reducing your investment costs to using your tax-free allowances, the following steps could make a big difference to your long-term finances – and maybe even help beat those January blues.

1. Keep your investment costs down

One way to make your money go further is to make sure you’re not overpaying on your investment fees. A difference of 0.5% might not seem like a lot, but over time it can really eat into your overall returns.

Our research shows that if you invested £10,000 over 20 years and paid annual costs of 1.0%, you would end up losing more than £1,800 in fees (this assumes an investment return of zero for simplicity’s sake). If the annual cost was 0.5%, you’d pay just over £950 in fees – that’s nearly half the amount. You can read more about the compounding effects of costs over time in this article.

Money might be tight, but you can make the most of the savings you’ve already accumulated by checking what fees you’re paying and considering switching to lower-cost funds.

2. Shield your investments from taxes

Taxes are another cost that can reduce your investment returns. If you invest through a general account, you’ll pay capital gains tax (CGT) at up to 20% on profits that exceed your annual CGT allowance. This allowance is currently £6,000 but will be halved to £3,000 from 6 April 2024. You might also have to pay tax on interest or income from investments in a general account.

A simple way to shelter your money from these tax liabilities is to invest through an individual savings account (ISA). An ISA lets your money grow free from the income tax you might pay on the dividends or interest you receive, as well as the CGT that could be applied on any profits that you make. This makes it a straightforward way of cutting the overall cost of investing. Under current rules, you can invest up to £20,000 in ISAs each tax year. The tax year ends on 5 April, so you’ve only got a few months left to make the most of your 2023-24 ISA allowance before it elapses.

Another advantage of ISAs is you do not need to declare them on your tax return, which can help to reduce your administrative burden as the self-assessment tax return deadline approaches on 31 January.

3. Save into a pension

If you don’t need access to your money until retirement, saving into a pension could be a great way of keeping your financial plans intact. It not only removes the temptation to spend the money (because it’s locked away until at least age 553) but it could also cost a lot less than you think. This is because personal pension contributions benefit from tax relief.

If you wanted to make a £100 contribution to a self-invested personal pension (SIPP), you would actually only need to pay in £80. The remaining £20 would be automatically added to your pension as basic-rate (20%) tax relief.

If you’re a higher-rate (40%) or additional-rate (45%) taxpayer, you can claim back an additional £20 or £25 through your self-assessment tax return, reducing the cost of a £100 pension contribution to just £60 and £55, respectively.

4. Make your savings work harder

Your chances of realising your financial goals don’t just depend on how much you save each month, but also on where you put it.

If you leave your excess savings in a bank account, you won’t be giving your money the same potential for long-term growth as you would from investing in the stock market. Although investments go down as well as up and you may get back less than you invested, history shows that shares have delivered higher returns than cash over the long term. 

This doesn’t mean you should invest all your excess savings in shares. It’s important to hold a balanced portfolio that suits your individual goals and risk profile. Spreading your money across different types of investments such as shares and bonds4, as well as across different sectors and regions, can help to soften the impact of short-term swings in prices and lead to smoother overall performance. 

Again, it’s about making the most of the savings you already have and giving them the opportunity to work harder for your future. By investing in a low-cost portfolio that is diversified across global shares and bonds, you could give yourself more chance of investing success – something that is even more important when you’re feeling the pinch.


Office for National Statistics


The minimum age at which you can access your pension will rise to 57 from April 2028.

Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.


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Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

The eligibility to invest in either ISA or Junior ISA depends on individual circumstances and all tax rules may change in future.

Any tax reliefs referred to in this document are those available under current legislation, which may change, and their availability and value will depend on your individual circumstances. If you have questions relating to your specific tax situation, please contact your tax adviser.

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Vanguard Asset Management Limited only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described, please contact your financial adviser.

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