It’s not long to go until the end of the financial year, how are your finances shaping up? If you feel like you’re drowning in paperwork and your personal finance to-do list is getting ever longer, read on….
1. Get organised
To assess your financial position and accurately review where you are, collect together any relevant paperwork. This includes bank account statements and statements for any savings and investment accounts, e.g. share trading accounts, ISAs and bonds. Next, collate your pension statements including private, state and any final salary pensions.
Do you keep a record of your household bills? If you’re keen to understand where it all goes, take a look at your bank statements over the last three months and add details of your average bills and spending to a spreadsheet so you can see exactly how much is going out.
You might also find it helpful to have a summary of what you have coming in, whether that’s from your salary, business income, pension, savings interest or dividends.
2. Get rid of any unwanted bills
Once you have done the calculations, it’s time to look for the things you would rather not spend your money on – this could be forgotten subscriptions for magazines or online services, small duplicate insurance policies, or memberships you don’t use.
Remember that your money is simply a tool to help you feel secure, do more of what you enjoy in life and support the people around you, so there’s nothing wrong with spending money! But you will want to make sure that you are using your money on things that are valuable and important for you.
3. Start saving sensibly
If you haven’t already done so, it is time to review your current savings accounts. How much interest are you receiving? These days, most savings accounts offered by high street banks have very low-interest rates, so you may choose to switch to a Fixed-Rate Savings Account or a Regular Savings Account.
You could look at a Regular Savings Account if you want to set aside tax every month. These types of account tend to pay a higher rate of interest, sometimes as much as 5% interest on your savings. But they can have fairly rigid terms and conditions, so you will usually need to feed money into your account each month or there could be a maximum balance that they’ll pay that interest rate on.
Another option is to look at a Fixed-Rate Savings Account where the interest rate is guaranteed for a set time period. If you already know how much your tax bill is going to be, you could put the money in a fixed-rate account due to expire before 31st January 2020. If you have sold a business or incurred a large gain during the year, you will probably have a good idea about what you will owe. The catch with this type of account is the fact you won’t be able to withdraw any money during the set period. Plus, if the Bank of England’s base rate rises, you won’t benefit from an increased interest rate. Have you been using your ISA allowance for your savings? For the tax year 2018/2019, the ISA limit is £20,000.
4. Refocus your investment strategy
Did you find any details relating to stagnating investments in your paperwork? Old investments set up years ago, collections of shares you inherited or bought through your employer? Perhaps you are someone who has a portfolio of shares you look at from time-to-time, without a solid investing strategy? Whatever the case, you probably already know you might not be making the most of your money. Having your money managed professionally can make a big difference.
It’s also useful to remember that investments which are very focussed in just a few areas (lots of shares just with one company for example) can be very high risk. Ask anyone who worked for a bank where they were encouraged to own shares. They felt like a safe bet at the time, but for many people, they’re now worth a fraction of what they paid for them, with little hope of recovery in the short term. One key strategy to protect yourself from the risks of having all your eggs in your basket like that is to diversify – as widely as possible.
Taking good care of your money and having a sound investment strategy should lead to feeling more comfortable and enjoying better returns – talk to one of our financial planners for investing advice.
5. Pension check – ready for retirement?
You’ve found your pension paperwork, so check the figure which gives a forecast of the likely income you will receive when you retire. How does it look? Consider your future plans: will this level of income match the lifestyle you want to lead post-retirement? Due to recent pension freedoms, you can now access your pension at the age of 55 more flexibly than ever before. The advantage here is that you can start to draw from your pension gradually as you head into retirement. However, the obvious risk is that, without careful, thoughtful financial planning, you could run out of money!
You might also want to look at consolidating your pensions to improve on costs, options or just to make things easier to manage. If you’re unsure whether you have got details of all your pensions, then contact the Pension Tracing Service, where you can ask them to track down pensions from old employers. If you have any pensions you’re not sure what to do with, then talk to one of our financial planners who can review these for you.