1. Make a start
The author Franz Kafka had a sign above his desk that said “Wait!” Procrastination is still a widespread problem. Even if we understand tasks are important, we put them off because we’re “not in the mood,” or we’re scared to tackle them. It seldom pays off. Avoiding decisions means missing out on opportunities. And when it comes to finances, the earlier you start taking care of them, the more flexibility you gain. Why not put a date on your calendar to tackle your finances – or better yet arrange an appointment with an expert?
Which is the better deal? Earning 1 percent interest on your savings account when inflation is at 2 percent, or getting 0 percent interest with 0 percent inflation? Most people just look at the nominal interest rate – and opt for the first scenario. But only in the second case do your savings retain their value. Long-term average inflation in Switzerland is 1.5 percent, which halves the purchasing power of money after 45 years. With an inflation rate of 3.5 percent, your assets would be worth only half after 20 years. You can combat this effect by investing your cash sensibly, for example, in shares of established companies that produce everyday consumer items. Because if price levels rise, the nominal gains of these companies do too.
3. Plan for retirement
Most employees have a Pillar 3a solution. But not everyone pays in the maximum permitted amount each year (6,768 francs in 2016 for employees with a pension fund). That’s really a pity, as you can deduct these contributions directly from your taxable income. The tax savings can soon add up to over 1,000 francs (assumption: single person, in Zurich, annual taxable income 45,000 francs). It’s especially worth paying in at the start of the year. This way you benefit from a preferential interest rate for the whole year. A Pillar 3a custody account offers even better earnings opportunities.
4. Plan your taxes
Only two things in this world are certain: death and taxes. At least we can influence the latter – totally legally. The first way to build savings is to pay into Pillar 3a. But voluntary top-up payments to your pension fund are also tax deductible. Your pension fund statement shows what is possible. The basic principle is to stagger deductions. It’s worth thinking about buying into a pension fund in good financial shape. If purchases are spread across several years, this regularly breaks the progression to a higher tax bracket. The same applies to tax-deductible renovations to preserve the value of your home: if the work is spread over two years it reduces taxes over the same period.
5. Look ahead
Many investors want to hold onto investments that have served them well thus far. But the return on an investment depends on the future, not the past. The start of the year is the ideal time to go over the books. Do I still have the right investment focus? Why did I end up with losses last time? Did I take too much risk? Was I diversified enough? Stock market crashes can’t be avoided. But the financial markets have always recovered long term. Statistically, the news is good: phases when the prices of securities rise tend to last more than twice as long as when the market dips.
A personal account, a savings account, credit and debit cards, a Pillar 3a account, Mobile Banking and e-banking: these banking services are indispensable but incur charges. Some savers only have one account with UBS instead of a banking package. However, the price-performance ratio works out much better for a banking package. And it also makes sense, for example, to register for KeyClub and collect KeyClub points, which can be used like cash at many partners.