The value of investments and any income from them can fall and you may get back less than you invested.

Are you making the most of your money? Six steps to successful financial planning

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As the cost of living has risen and household finances have become increasingly squeezed, it can be difficult to set aside savings for the future.

The good news is that regardless of how urgent your needs, there is plenty you can do to get where you want to be.

A financial advisor will be able to help, but whether you want to grow your wealth, save for retirement or ensure your loved ones are provided for, the place to start is to ask yourself the right questions.

  1. What do you want your money to do for you?

    Where do you want to be in five, ten or 20 years’ time? One thing that consistently surprises us at Brewin Dolphin is that even if someone is saving conscientiously, they may not have a clear goal in mind. However, defining your goals is the critical first step in your financial journey. What are the financial milestones you want to hit? Do you have a secure plan in place for your retirement? How are you going to help your children as they grow up? Are you making the most of the money that you have accumulated, or could it be working harder? It’s hard to build something when you don’t know the end result you want – being clear and specific in what you want now will help you build toward a brighter financial future.
  2. Are your savings growing? 

    One thing to bear in mind is that savings do not necessarily automatically grow in real terms. Inflation may eat away at them, or you could be missing out on opportunities or solutions that could make them grow faster. For example, inflation data released by the Office for National Statistics (ONS) in May 2019 showed that the cost of living, as measured by the Consumer Prices Index, rose by an annualised rate of 2% that month, or 1.9% if measured by CPIH, a slightly different measure which includes the costs associated with owning a house. This is a rate that current account interest rates can seldom keep pace with. There are investment options that can help you keep up with rising prices and may help you avoid your savings losing value in real terms – for example, a stocks and shares ISA. This can be a complex topic, so professional financial advice really helps.
  3. When do you want to retire?

    This question will be at the core of any long-term financial strategy. Working backwards will allow you to cross-reference your desired lifestyle with the funds you need to sustain it and the time needed to accumulate them. Retirement planning can be a complicated process, but doing the thinking as early as possible takes away unnecessary stress down the line and can deliver the key benefit of clarity.
  4. Are you separating your long and short-term priorities?

    Defining your goals is one thing – but working out how much time you need to get to them is just as important. Different categories of investment are appropriate to different timeframes, so choosing wisely will depend a great deal on knowing what you want to do, and when you want to do it.
  5. Is now the time to pay off your debts?

    This is one of the least exciting and most difficult questions to ask, but it can make a big difference. Most debts are ‘dead money’ and cost far more than you realise. Repayments come out of net income, meaning the actual gross amount they cost is far higher. If you are able to pay off your debts – or some of them - it will ultimately save you money and make it more straightforward to plan for the future. Similarly, if you come into possession of a lump sum, a decision will be necessary: will it benefit you in the long run to pay off part or all of your mortgage now, or to invest this sum, for example in an ISA? These can be complex considerations, and professional advice will help you make the right choice.
  6. Are you using all your tax allowances?

    To make the most of your money, you can give yourself a helping hand by understanding and benefiting from all the appropriate tax allowances and incentives available. These include not only tax-efficient savings vehicles such as ISAs, but also allowances that the government has put in place to incentivise long-term savings, such as pensions. With the tax landscape frequently changing, it makes sense to keep on top of the latest developments and how they affect you. For example, it’s possible that in the next years the government will introduce changes to the higher rates of income tax: these are changes that can have a material impact on your life, and it is wise to keep abreast of them.

 

 

To find out more about how Brewin Dolphin can help you answer these questions, request a callback today.


The value of investments can fall and you may get back less than you invested.  

Past performance is not a guide to future performance.

No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us.

Please note that this document was prepared as a general guide only and does not constitute tax or legal advice. While we believe it to be correct at the time of writing, Brewin Dolphin is not a tax adviser and tax law is subject to frequent change.  Tax treatment depends on your individual circumstances; therefore you should not rely on this information without seeking professional advice from a qualified tax adviser.

The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

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