Spring clean your savings
Spring cleaning is established in cultures around the world. At this time of year, we deep clean our homes – but it’s also a perfect time to step back and ensure your financial ‘house’ is in good shape.
It makes sense to take stock to understand better your savings and assets, and regularly check what you have and ask why. We all need resources working well for our ambitions to come good, especially with children needing more help for their future, and retirement costing so much.
Are you clear on all your assets?
It’s worth setting up a system to organise yourself. This can be a filing cabinet, a spreadsheet on your computer or even more basic, as long as it’s easy to see what you have and it’s secure. To be in control, we need to understand the resources we have and then organise our financial items for a better future.
Think about risk and what parts of your life needs to be safe; risk is part of life but are you uncomfortable with the downside of investment risk? Often, we accumulate investment plans as a result of sporadic needs through life, and not as part of a cohesive strategy to achieve what’s important. Stock markets can be rewarding over long time period, but should always be considered as part of a clear strategy that is aligned to your attitude to risk and personal objectives.
Are you making money work as hard as it should?
As we are near the end of the tax year, we should review our accounts and the savings allowances. The ISA is a favoured savings vehicle, and you can put away £20,000 each year but modest sums can also be saved. You should though think carefully about this as many tuck money away in cash ISAs to see it erode with inflation. A disciplined strategy can ensure funds work well, are risk controlled and don’t disappoint when you need them.
Should you help your children?
with escalating living costs and University fees which result in significant borrowing, it’s difficult for young adults. The ‘bank of Mum and Dad’ is now a vital support for the younger generation, but plans to help have to be balanced against your own security. You can save for children’s future using the Junior ISA and the new Lifetime ISA, depending on their age and the purpose.
The Junior ISA (for under 18s) can build up a tax free reserve for helping with University, so that student debt is less of a burden. On the other hand, the Lifetime ISA (for under 40s) can build a deposit for a first home or your retirement, with a potential bonus of 25%! Pensions were virtually left alone by the Chancellor this year, but you should consider if your arrangements are fit for purpose and you’re making the most of opportunities. Tax relief is highly valuable especially when contributions by some higher earners protect their Personal Allowance which can otherwise be lost. Growth is key to gain a healthy income from saving in a personal pension. Modern plans now allow more control over investment. These days you can access top performing managers for better opportunities and avoid the investment ‘dogs’.
Get organised; think about where you are going.
It’s liberating to spring clean your finances and know you’re in control for your family’s future. We should all take time to think about long term plans, because if you don’t consider where you are going then you’re probably not going to get there!
Need more advice?
To speak to one of our advisers about financial planning:
Shane Presley is a Chartered Financial Planner for Lloyd & Whyte (Financial Services) Ltd. It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding of taxation and can be subject to change in the future. It does not provide individual tailored investment advice and is for guidance only. We cannot assume legal liability for any errors or omissions it might contain.