Do you have a plethora of things constantly running through your mind?
Your career, family, health, diet, boss, partner, exercise? And your to-do list, which you add to more than you cross off. Can you feel yourself getting stressed and anxious just thinking about it all? And what about your money?
Take a breath, perhaps grab a glass of wine and read on. Let me shed some light when it comes to money with the 101 of financial planning that will:
- Give you financial freedom and security.
- Help you pay less tax.
- Help you to invest wisely.
Remember, with investments, the value and income you get from it can go down as well as up!
It’s a good idea to plan for the life you want to lead, the goals you want to achieve and to be financially independent.
The best time to start planning financially is now. For both women and men, the younger you start, the better. For women though, it is even more important as we live longer and tend to take time off work to look after children and parents.
Start by doing a quick audit of where you are:
- What is your financial situation today (your budget) – income, expenses and therefore disposable income for financial planning?
- What are your goals? Do you have your eye on a dream property? Are you planning a wedding? Do you want to retire early? Do you want to send your kids to private school? When do you want to achieve these by?
- With the budget you have, how would you prioritise your goals and how much do you want to put aside for each one?
Once you have had a chance to think this through, break your budget down into what you need to cater for right now, what you want to achieve in the medium term (5-15 years) and what you need to plan for more into the future, such as retirement.
Broadly speaking, build a cash buffer for the here and now, which is usually around four times your monthly income. Once you have this cash buffer, and unless you foresee large expenses in the next three years, then start to divert the cash into investments that are not only working harder for you but also support your medium and long term goals.
When I talk about medium term, I am looking at a 5-15 year time frame and looking at stocks and shares based ISA. If you’ve never invested before, don’t fear, you can get advice and an appropriate investment strategy that matches your appetite for risk. The basic rules are: don’t put all your eggs in one basket, diversify your investments through different types of assets (bonds, property and equity) and diversify geographically (for example don’t have all your investments in UK, include some investment in the US, Europe, Far East etc). For the cautious investors among us, you may want to go for more fixed interest products such as bonds and less equities; for the more adventurous the reverse is true.
Long term, we all want to retire. With a pretty dismal state pension it is important to do your own planning. Pensions are a fantastic investment as they are flexible and tax efficient. I often hear people saying: ‘I don’t believe in pensions’. Well you should! Not convinced?
Take a look at this quick calculation:
You want to retire on an income of £50,000 at age 65. Life expectancy for a woman in her 60’s is around 91 years. That’s £50,000 x 26 years. You would need to save £1,300,000. That’s a lot of money to save. So, the earlier you start, the more time you will have to build up sufficient money for you to retire comfortably.
The added benefit of pensions is that you get tax relief on your contributions up to the annual allowance of £40,000 or your earnings if lower. If you earn £110,000 or more, this rule is changing for the next tax year and I would strongly encourage you to jump on the horse before this happens.
It is all very well planning for future but what if something does go wrong. It’s good to have a safety net in place to cover your income, pay off your debts and provide for your dependents in case you are unable to work, have a serious illness or pass away unexpectedly.
Remember, you don’t have to do this on your own and you can speak to a financial adviser. If you do:
- Make sure they have adequate qualifications – a diploma is the most basic, being Chartered indicates a higher standard of professional development.
- Always check the fees.
- Make sure you have good rapport with them. While you don’t have to be friends with your adviser, trust is very important.
- Make sure they are independent rather then tied to a particular bank or provider
Hopefully, this has eased the racing heart and given you a little more clarity when thinking about financial planning. While this blog gives you a broad overview of the basics of financial planning, it is not meant to provide advice on individual requirements for which you should speak to a financial adviser.
About the author – Gemma Stanbridge:
Gemma has been advising a broad range of loyal clients, including professionals, entrepreneurs and retirees, for almost a decade. She prides herself on the long-term relationships she has built over the years, which allows her to help clients meet their financial goals throughout the different stages of their lives.
While Gemma provides a range of financial services to help clients grow their wealth and assets, she specialises in retirement planning and inheritance tax. Most people do little or no planning in this regard. Recognising this, particularly for inheritance tax, Gemma heads up a team at Westminster Wealth Management that focuses specifically on this area of financial planning. Clients are able to plan for retirement and mitigate inheritance tax liability in a controlled, flexible and effective way while maintaining their quality of life.
At the same time, Gemma is increasingly sought after by international clients for advice on financial planning and pensions. This includes:
- Advising UK citizens with US connections and/or legacy assets.
- Advising current UK residents with US tax reporting requirements.
- Repatriation of pension assets, in particular for clients returning to Australia and New Zealand.
Gemma is a fellow of the Personal Finance Society, the highest qualification a financial adviser can hold, and an affiliate of the Society of Trust and Estate Practitioners. In 2015, she received WATC’s Rising Star award for Investment Manager of the Year. This recognises individuals who are seen as having the potential to become a future leader in their industry and who strive for results.
Prior to joining Westminster Wealth Management, Gemma worked for an NGO in Cameroon. She is a keen sports woman and participates in a multitude of sports including water-skiing, open water swimming, triathlons, tennis, horse-riding and wind-surfing. She is currently training for her third half iron-man and would like one day to trek to the North Pole.