30th January 2018
Our Top 4 Recommendations to Take Control of your Finances in 2018
January – a new year and new beginning. For financial planners, January is one of our busiest months as people often want to start the year off right. To help you, here is our yearly checklist.
Take a moment to review your financial health
Articulate your goals
We all have goals:
– I want to retire when I am 60!
– My grandchildren will need help to get on the property ladder’
– ‘When I retire, I am going to travel the world’
What you do over the next 12 months will affect your likelihood of success to achieve your goals.
By taking the time to put a plan around key life events ensures you are fully prepared and enables you to make the best decisions to achieve your goals.
Are you fully using your personal allowances? If you withdraw cash from your pension, what are the tax implications? What is the impact on inheritance tax of gifting money for your grandchildren’s education? These are some of the many questions we help our clients with.
Revisit your budget
That said, achieving goals is more than often dependent on financial constraints. For example, it is key for those approaching retirement to check when they can viably retire and whether their retirement lifestyle is achievable. Where this isn’t the case, your financial planner can help you put a plan into place to address any shortfalls or evaluate the impact and adjust expectations.
As financial planners, we always advocate having a budget to keep you on track. Often people have a ‘glossy-in-a-perfect-world’ version that provides a good ballpark idea of where clients think their money is going.
Things do change and checking your budget once a year will help you reign in unwanted costs and adjust your spending. As a case point, many utilities and insurance policies automatically inflate their prices year on year. Such a review is a great impetus to negotiate a better deal and switch to lower cost providers.
Reign in the untoward spending
In this age of low interest rates and zero-rate balance transfers, it can be easy to let debt creep up on you. This has wider implications on your financial health – depending on what ‘life stage’ you are at.
In the early to mid-professional years, having debt can greatly impact your ability to get financing and a mortgage as banks now have stringent lending criteria on the back of the changes the government made after 2008’s financial crisis.
Pre-retirement, we see a lot of people with flexi-policies accessing their pension pot around 55 years of age to pay back debt. While this is understandable, it means that retirement accounts are being eroded and thereby could lead people to run out of money later in life.
It is often said, that the 10 years before intended retirement are referred to as the critical years. Decisions or indecision in these crucial years can make or break retirement. If you have not reviewed your plans within the last 12 months, then please contact us to arrange no obligation consultation, held at our expense.
Take advantage of the low interest rates
Recently the Bank of England decided to increase interest rates after a prolonged period of depressed rates. However, to put this into perspective, as the following graph shows, rates are still exceptionally low.
We recommend locking in these low interest rates. For example, compare your credit card deals and loans to those available in the market to see if these rates can be improved. Also if your fixed or tracker mortgage is due to end within the next 12 months, schedule time with our mortgage advisor – Matthew Metcalf – to see what other offers are available in the market.
Alongside low interest rates, we also have increasing inflation. This means the value of money left in deposit accounts is gradually losing value over time. It can be challenging to find investments that are deemed ‘safe’ but yield positive net returns. There are a variety of investment vehicles we advocate, but to ascertain what is best for you, schedule some time with one of our financial planners.
Make sure you understand the recent changes in Pension regulation
Finally, pensions in 2018 are very different than they used to be 20 years ago, and even 10 years ago. Most of our clients who are approaching or already in retirement have so many options. These pension flexibilities can be complex and your financial planner can help walk you though the pro’s and con’s as they pertain to your personal circumstances. As a case in point, is it better to add to your pension or invest in an ISA?
There are also government initiatives – such as the Lifetime ISA – that are aimed at those under 40 to help them save for their pension and/or buy their first home. It is effectively free money if you have cash spare as it allows you to invest up to £4,000 per annum and the government provides a 25% annual bonus up to £1,000.
Then there are the changes to how State pensions are calculated. For example, it now takes 35 years of NIC contributions to secure a full state pension versus the historic 30 years. We recommend finding out how much your new State Pension is worth and you can so online and quickly here.
Here to help …
So there you have our top 4 financial recommendations for 2018. If you are a client and require some assistance, give us a call to schedule a review or ‘health check’.
If you are not a client, you are more than welcome to make an appointment and have a general chat to start the year on the right foot.