FOOL'S EYE VIEW
ISA Deadline in 12 Months

By James Carlisle
April 5, 2002

Today is 5th April, so if you haven't done whatever your accountant/husband/mother was telling you to get done by the end of the tax year, it's now too late - bad luck. There's no need to fret about it, though, because a whole new tax year begins tomorrow.

As far as your personal finances are concerned, it's far more important to spend time thinking about the big decisions and getting them right, than it is to get swept up in minutiae. Of course, if you've decided to invest in an individual savings account then, because of the effects of compound interest, it makes sense to get started as soon as possible. But if you find yourself doing something in a rush, then you're doing something wrong. As far as ISAs are concerned, the important questions are things like:

- How much money should I have in shares, compared to my short-term savings?

- Would I be better to pay down my uncomfortably large mortgage this year instead of putting money into shares?

The answers to these questions are influenced by long-term considerations like your promotion prospects, how many children you have or want to have, when you'd like to retire and so forth. In these terms, whether it's the 5th April or the 6th doesn't make the slightest difference.

In fact, it can be damaging to rush into things along with the crowd. If the crowd is rushing into something, then there's a very good chance that that something is having its price pushed up and if something's price is pushed up, then that will tend to make it a less good investment. In fact, if something's worth investing in, then the time to be buying it is more likely to be when the crowd's rushing the other way.

Another problem, of course, is if you buy the wrong thing and later decide to switch to something else. It's an unfortunate fact of finance that the 'wrong things' often come with hefty 'exit charges' attached. Too many times have I heard of people complain of being rushed into a pension before a certain date because of 'some technical change in the tax law', only to find later that the pension isn't suitable and that there are hefty charges involved in getting out.

The best way to avoid these problems is to get on top of things and stay on top. Start by sitting down to work out where you are with your finances: to help you along, why not work through the Fool's financial health check. After that, you should try to work out where you need to get to and the place to kick off for that is the Fool's Learn To Invest section.

Going through this process should help you decide how much to save, invest and pay down the mortgage, each month. You can then think about getting the right savings account, the right mortgage and the right ISA. Once that's done and you've got the standing orders going, then you can go and do some gardening.

So, if you feel gutted that you've missed the 'ISA Deadline', don't worry because you haven't. In fact, you've almost got a whole year to go. Just don't leave things until the last minute this time!

More: ISA Centre; Pension Centre; Mortgage Centre; Financial Healthcheck; Learn To Invest.