Is it time for a financial health check?

Is it time for a financial health check?

When was the last time you had a financial health check? Was it a year ago, a few years ago, or maybe you’re wondering what this entails, so quite possibly never! Like our physical and mental health, our financial health can hugely impact our overall wellbeing. That’s why it’s so important to know what shape your finances are in; your peace of mind is priceless.

An article from The Independent shows that back in 2015, money worries were the leading cause of stress in the UK. And we would hazard a guess that this figure hasn’t changed much since then.

Often the hardest thing to know is where to start. We recommend you first take a look to see whether there is a problem or not. And from there, you can set goals to get you back on track.

For many of us, talking about our finances is among our least favourite topics of discussion. And if we don’t like discussing money, it’s more than likely we don’t proactively deal with it either. So, our question is: could your money be working harder now to put you in a better situation financially later? Only a financial health check will answer that.

How do you know it’s time for a financial check-up?

To name just a few:

  • You don’t remember how much is in your pensions, or how many you have
  • You’re unsure what interest your savings are earning
  • You’ve accumulated a mountain of paperwork
  • You haven’t looked at the emails or letters you receive from your providers, or you’ve read them, but can’t make sense of them
  • A big life event has happened recently
  • You’re thinking of a career change
  • You’re looking to retire in 10 years

Here’s what to do next

If you think you are due a financial health check, here’s what to do next:

  • Analyse your income and expenditure

Take a look at how much income you received over the last year and compare it against your regular expenses. If you’ve spent more than you’ve received in, then changes need to be made. The main area you’ll need to focus on is your discretionary spending. Are there any subscriptions that you’re no longer using? Or could you cut back on any additional luxuries?

The Money Advice Service has created a free online financial health checker tool here. Not only will this paint a clearer picture of your financial situation, but it’ll also suggest areas that you could work on and offers practical tips to help better your situation.

Taking this up a level our cashflow modelling forecasts your wealth over your lifetime. We account for changes to circumstances or big spends that you have planned. We then use this forecast to assess where improvements can be made.

  • Revisit your budget

Building a budget is a great way to keep tabs on your spending and see whether you’re on track to achieve your saving goals. Although it can be painful to see how much you spend and on what, it’s also an interesting exercise to do.

If you already have a budget, then you should revisit it every year, and make any necessary adjustments that account for changes in income or additional expenditure.

  • Review retirement savings

If a review of your budget reveals that you have additional income, could you be putting more into your pensions?

Have a look at your defined benefit and defined contribution pots, as well as your savings in other pensions. Are you on track to save what you need for your retirement?

You can use the pension calculator here to find out if your retirement income is enough to fund your desired retirement lifestyle, based on your current savings. If it isn’t, then it’s time to see if you can save more, even if you have to make spending cuts elsewhere.

  • Make a debt-free plan

Do what you can to reduce your debts, prioritising high-interest debt first, so that you’re not wasting your hard-earned money on interest payments.

A good starting point would be to set goals to reduce your debt and credit card spending by a certain amount in the next year.

  • Review insurance policies

Check that your insurance policies are still fit for purpose. Do you have the right amount of insurance for your stage of life?

If you do a quick bit of market research, can you find the same or better cover for a lower price with a different provider? Be careful; your health may have changed since you took your existing policies out.

  • Get your financial health check done by a professional

Usually, people seek financial advice when a big life event happens. However, getting the input from a financial professional earlier can prove invaluable.

If you’re not already working with us, feel free to book a chat with one of our professional advisers, the first meeting is always free.

Remember – the goal shouldn’t be to build your wealth for the sake of building wealth. It is merely a case of growing and structuring your wealth so that you have enough to live the life you want. This number will vary for each person, but knowing ‘your number’ is a crucial part of being able to achieve it. That’s where we can help.

If you think it’s time for your financial health check, then please get in touch and speak to one of our financial planners.