38 Financial Planning Tips

If you’re worried about your personal finances throughout this time, our financial planning team have put together 38 tips in seven key areas to help.

Expenditure

1. Produce a spreadsheet of all your monthly expenditure. What could be reduced or removed, e.g. gym memberships, discretionary subscriptions, child care costs that no longer apply? 
2. If you have credit card balances that are not on 0% rates – could you arrange balance transfers and reduce your monthly cost?
3. What items in your weekly shop do you consider a luxury and would be prepared to sacrifice or downgrade?
4. Are your utility and car and home insurance providers offering you the most competitive terms? Now is a great time to shop around. 
5. Could you walk/cycle to some of the places you would typically drive to, especially as the weather improves?
6. Try to maintain a good credit score by not missing monthly repayments on credits cards or finance arrangements. Have a direct debit set up so that you always make at least the minimum payment each month. If you can’t make a payment then contact the lender in advance to agree what can be done. Maintaining a good credit score will help to keep the most competitive lines of credit available to you should you really need it and your costs down.
7. There are uncertain times ahead for many companies and their ability to keep trading. Use a credit card wherever possible to protect your money. Should a company accept payment and then cease trading without providing you with the product, Section 75 of the Consumer Credit Act 1974 means that you’ll be able to reclaim the value of purchases between £100 – £30,000 directly from your credit card provider.  Where possible, repay your credit card expenditure straight away to avoid incurring interest charges.
8. Spend your gift vouchers if you have any concerns about a company that you have them for. If the company goes into liquidation you are unlikely to recover any of the value.

Life insurance

1. Don’t be too ruthless with any spending cuts, you took out that life insurance policy for a reason. If the need remains, then so should the cover. During times like these, potentially more so. Replacing in the future could be far more costly or not possible if your health has deteriorated. Speak to your insurer, some are currently offering payment holidays however they require missed premiums to be repaid within agreed timescales. If you are a business owner, is this life insurance policy paid in the most tax-efficient way? Paid via your company may reduce the true cost – seek financial advice on this.
2. Whether you have a life insurance policy in place or not, consider if you have adequate and appropriate cover. The vast majority of us will survive this pandemic but if you’re thinking about what financial gaps might be left in your family if something happened to you, now would be a good time to review your cover.

Income

1. First, consider if your income is likely to change over the short or long term.
2. If your income is likely to reduce, could you apply your skills in a different way or offer a different service through these unusual times that might generate an additional income stream?
3. Consider what your short (one to three months), medium (six months) and longer-term (18 months) outlook might look like based on a conservative value for anticipated ongoing income and your anticipated or adjusted expenditure
4. If you are a married couple with investment income, is one person’s income likely to be affected more significantly than the other? If so, then it may be appropriate to review the ownership structure of your shares, and investment property to ensure that you remain as tax efficient as possible and retain as much of your income as you can.
5. If you are a landlord, consider what would be the impact if your tenant cannot pay their rent?

Mortgages

1. Mortgages are often one of your biggest monthly costs. If you are close to the end of your current mortgage product term or are now outside of it, could you get a better rate and therefore reduce your monthly payments?  Some lenders will let you switch to a new rate with them prior to the end of your current product term without penalty. If you aren’t sure then it might be worth a call or speak to an independent mortgage adviser.
2. If you are concerned about the size of your cash reserves, some lenders may allow you to borrow an additional sum. Do not assume that this can be done, if you think that you might need to explore this option then contact your lender sooner rather than later to explore your options or seek independent mortgage advice. Remember though, that if you borrow more than your monthly mortgage repayments are likely to  increase
3. You may be able to reduce your monthly mortgage payments by extending your mortgage term either with your existing lender or by remortgaging to a different provider.  There can be costs involved if you are switching products or remortgaging to another lender so these do need to be taken into account. In addition, if you extend your mortgage term the overall cost of repaying your mortgage will become greater as you will pay interest for a longer period of time.
4. If you’re struggling to make your monthly mortgage repayments then your mortgage lender may allow you to switch to an interest-only payment for a period of time.
5. If you think that you may need to use this option then it is advisable to speak to your mortgage lender as soon as possible.

Cash Savings

1. If you have cash on deposit or held within premium bonds and are likely to need to supplement your income then now may be a good time to review your cash holdings.
2. It’s worth reviewing their security, interest rate payable and how accessible they are.
3. Have a plan for how much you would need to access and when you might need it. If notice is required to avoid penalties, determine when this needs to be done.
4. The Financial Services Compensation Scheme fully protects the first £85,000 per eligible person, per bank, building society or credit union and up to £170,000 for joint accounts.
5. To protect against the failure of a bank try not to hold more than this with just one bank, building society or credit union.
6. You may wish to consider using National Savings and Investment products which are backed by HM Treasury and 100% secure.

Pensions and investments

1. The market downturn during the pandemic was quite extreme however most markets have since seen significant recovery.  If your own funds fell by more than you felt comfortable with during this period then this may indicate that your investments are not aligned with your attitude to risk and it’s something that should be reviewed.
2. Investing should be considered a medium to long term strategy. Try to retain sufficient cash reserves to meet any short-term unexpected costs. A period of market downturn is generally not a good time to exit investment markets completely or reduce the level of investment risk that you are taking if it can be avoided.
3. Reducing risk during a downturn may limit further losses but will also mean that you are unlikely to capture the fuller recovery.
4. If you were planning to sell an investment for a particular need, consider if that need can be delayed to allow the market to recover or if the cost can be met from other more stable assets such as cash.
5. If retirement is years away then whilst concerning, the recent market fall and subsequent recovery may mean little in relation to your future retirement position however if you are in a position to, then try to consider any future investment market downturns as an opportunity to invest at a much lower entry cost than potentially allowing you to benefit from a future market recovery. Unless you are an experienced investor, it is sensible to seek independent advice.
6. If you are approaching retirement and concerned about whether you will still be able to retire, seek independent financial advice to help you appraise and plot a path to your existing or revised retirement goal.
7. If you are using Pension drawdown, could this be stopped or reduced during periods of investment market downturn? Drawing the same regular sum from a falling pension fund value may have an impact on the sustainability of the fund. If you have other assets then you should establish if during periods of market volatility the order in which you draw on them should be revised.  This is certainly an area where independent financial advice should be sought.

Wills 

1. Do you have a will, if so, is it up to date? 
2. If you cohabit but are not married or in a civil partnership then without a will your partners will have no legal entitlement to your estate.  The rules of intestacy will determine who would be entitled to your estate. You can use the Gov.uk tool here.
3. If you do have a will, are your financial affairs in order, easy to find, and decipher? 
4. Do the right people know where to find your will? 
5. If you do not have a will then why not get this addressed now and have that nagging “to-do” finally ticked off your list!  Use a reputable firm of solicitors to ensure that your will is drawn up correctly.

If you have any questions on any of the above or would like to chat about your personal finances, please get in touch. We’d love to help.