By Jeannie Boyle, Director & Chartered Financial Planner EQ Investors
As a turbulent 2020 ends, the New Year is an opportune time to consider whether your financial plans are on track and highlight areas for action.
Here are five tips to help you on the right path to a financially sound 2021.
- Set goals for the life you actually want
Work out what you want from life and make your money work towards that, rather than vice versa. Your priorities will naturally change over time, so taking the time to differentiate your short, medium and long term goals will help keep you focused and on track through the inevitable bumps in the road.
- Use your ISA allowance
You have until 5th April to use your ISA allowance. The introduction of the Personal Savings Allowance and low interest rates have reduced the effectiveness of Cash ISAs over the last few years. Using a Stocks & Shares ISA to invest your money should help give you better returns over the long term. If you are unlikely to need the money in the next few years you could look at readymade portfolios as a way to get started with investing.
- Get pension savvy
Take the time to check where your pension savings are. Most people have a few different pensions from different jobs. It can be hard to keep track of multiple pensions. It can be useful to combine these into one pot so you can monitor the investments. With everything in one pot it’s easier to understand if your pension will be enough when you retire. If not, you can take advantage of tax relief & top it up.
Check whether your pension is invested in line with your values. While most workplace schemes offer an ethical or sustainable option, it’s worth checking the holdings. Most people don’t know where their money is invested. Often, pensions invest in companies we might not like, such as tobacco or fossil fuels companies.
Finally, make sure that your expressions of wish for pensions are regularly updated.
- Build a picture of your current and future finances
Financial planning is all about anticipating the consequences of different choices and situations. By looking at your income, outgoings, savings and other assets, you can crunch the numbers to create a long-term projection of your finances. Identifying trends (positive or negative) can help to give you the best chance of achieving your goals and have a huge impact on how in control of your finances you are.
We’ve designed our free online health check to help you measure your financial fitness, and to see what your finances might look like in the future.
- Peace of mind
One person in the UK develops dementia every three minutes, so stay in control and plan ahead by setting up a Lasting Power of Attorney (LPA) and allow powers for discretionary management. Every adult with assets should look at getting an LPA, otherwise your loved ones will need to apply through the courts. And don’t keep putting off getting or updating a will.
With a few details from you about your financial situation and your goals, financial advisers can help you come up with an outline of what you need to consider over the coming years and the next steps you should probably take.
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