Keeping plans on target
For many of us the start of the New Year inevitably brings high hopes of eating less and exercising more. However without clear goals and a plan (joining a gym or signing up to a weight loss group) all too often our best intentions have fallen by the wayside before January is over.
The same could be said of our finances, where it is even more important to set goals and implement a financial plan to achieve those important milestones. Working with a suitably qualified professional can help you to identify what is important to you; implement a savings strategy to achieve your goals and carry out regular reviews, along the way, to check progress.
It is useful to consider your financial planning needs using the following headings:
You should think about the financial implications in the event of redundancy, accident, illness or death. Would you be able to maintain any loan repayments and/or the family’s standard of living?
It is possible to put in place a range of insurance policies that would provide protection against all of the above. Also, if you have not already done so then you should prepare a will and Lasting Power of Attorney.
Short Term Goals
It is important to have access to an emergency cash fund – ideally equal to six months net income. Thereafter, think about events that could occur over the coming three to five years. For example, car purchase, buying a house or a holiday of a lifetime. Over this timescale it is probably best to commit to a regular cash based savings plan.
Medium Term Goals
Once you have put in place a plan for your short-term objectives, you can then consider a strategy for the medium term say over the coming five to 15 years. This could be saving towards children’s school or university fees, a wedding or helping children to get on the property ladder. Over this timescale you can consider a share-based strategy utilising your ISA allowance (currently £15,000 per person per tax year) or assets capable of creating capital gains (in the 2014/2015 tax year it is possible to realise gains of up to £11,000 without triggering a tax charge).
Long Term Goals
For most people this is retirement. Pension funds are typically accumulated over the course of a working life, and the sooner you start the higher the chance that the fund will deliver the required income at the date of your choosing.
Income tax relief is available on personal contributions to registered pension schemes. Although this is subject to an annual allowance. The fund also benefits from tax efficient growth, and HMRC propose to remove any restrictions regarding how much income you can draw in retirement.
Just as you might work with a personal trainer to meet your fitness goals, there are significant benefits to working with an independent financial advisor to help you realise your future financial goals
When structuring your financial affairs you should seek independent legal and financial planning advice. If you would like to discuss your options in more detail, please contact OCM Wealth Management on 0845 338 1971.