Financial planning week: 10 steps to take before New Year

This month marked financial planning week, which aims to showcase the benefits of financial planning, from the financial gains to improved wellbeing. To celebrate this, we’ve got a checklist of steps you should take before 2020 ends to ensure you’re on track.

1. Think about your lifestyle goals

The financial steps you make should be linked to your lifestyle goals. As a result, this is one of the first things you should do. Since setting out your current financial plan, have your aims changed? Take some time to think about what you want to achieve in the short, medium, and long term.

2. Review your financial safety nets

No one knows what will happen, but you can prepare for the unexpected. Having financial safety nets in place can provide peace of mind that should something happen, such as becoming too ill to work for an extended time or an unexpected bill comes up, you still have security.

Ideally, you should have an emergency fund that will cover three to six months of expenses. If you’ve dipped into savings, look at how you can replenish this fund. You should also review the financial protection you have in place and ensure they’re still relevant for your circumstances and priorities. In some cases, policies will no longer be needed, while in others it may be useful to take out additional cover.

3. Assess your debts

If you have debts, it’s worth spending some time reviewing them too. What interest rate are you paying and are you on track to pay them off? Prioritising paying off debts with higher interest rates makes financial sense, as can making overpayments where possible. You may be able to reduce the interest rate by transferring the debt too. Switching to a 0% interest credit card can help you reduce the debt quicker.

4. Check the interest rate on your savings

Interest rates for savings accounts are at an all-time low. It means it’s more important than ever to shop around for a good deal to make your savings work as hard as possible. If you’re in a position to, locking your savings away for a set period or choosing an account with restrictions can help you access higher interest rates.

Keep in mind, though, interest rates are unlikely to match inflation. In real terms, this means your savings are reducing in value. If you’re saving for long-term goals, investing may be appropriate.

5. Take a look at your investments

While looking at your savings, you should review investments too. It can be tempting to base your review on simply how investments have performed recently. But keep in mind investments should be made with a long-term goal in mind and there has been significant short-term volatility this year. Rather than focusing on recent performance, look at the bigger picture and ensure your investments are still appropriate for you.

6. Check your pension

If you’re not yet retired, a pension can be abstract. After all, it can be decades before you’ll actually use the money you’re saving for retirement. But it’s important to regularly review what’s going into your pension and what this means once you start using it to create an income.

If you are retired, review your pension savings with your financial plan in mind. Are your withdrawals sustainable? Do you have the level of security you want? And is your current income allowing you to live the lifestyle you want?

Pension savings can be complex and it’s essential you have a long-term outlook. You can get in touch with us if you need help understanding your pension savings.

7. Consider your retirement plan

While looking at how your pension is growing, don’t forget to think about what you want out of retirement too. How do you want to spend your time when retired? We often focus on the big areas when looking at retirement lifestyle, but your day-to-day plans and goals are just as important. Setting out what you want can help ensure your savings are on track and ensure your retirement lives up to expectations.

8. See if you’re making the most of allowances

How have you used your allowances so far? From the ISA subscription limit to the pension annual allowance, making the most of these can help your money to go further. Thinking about how you’ve used allowances now can help you avoid the end of tax year scramble in April 2021.

9. Review your estate plan

While reviewing your finances, you should consider your estate plan too. Changes to your wealth and circumstances may mean you need to adjust your estate plan to reflect these. If you don’t have them already, putting a will and Power of Attorney in place should be a priority. If you do have these, give them a quick review to make sure they still accurately reflect your wishes.

10. Check when your next review is

Finally, regular reviews are an important part of your financial plan. They provide an opportunity to check your plan still aligns with your goals and reflect any legislative changes that may have been brought in. Check when your next review is scheduled for, but remember, you can contact us at any time if you have any questions or concerns you’d like to discuss.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change.