Plotting your Financial Future in Uncertain Times
In this blog post, by RWA 168 Annual Open Exhibition sponsors Smith & Williamson, we look at three basic stages, or building blocks, towards financial independence which anyone can work towards.
By Tim Blowers, Financial Planner, Smith & Williamson
One of the key factors behind my decision to join Smith & Williamson in 2018 was its local community focus, including strong support for art and culture across Bristol.
Part of this includes the firm’s long-term support for the RWA and our sponsorship of the Annual Open Exhibition, which is now in its sixth year and attracts around 18,000 visitors each year.
Our clients and staff love the quality and diversity of the art on show and in normal times, we would be looking forward to hosting and attending our annual reception. Nevertheless, we are delighted the exhibition is still going ahead this year and we look forward to enjoying what promises to be another exciting collection of works.
Of course, our lives have been transformed in so many ways this year, but, one thing remains constant – indeed it is more crucial than ever – and that is the importance of robust financial planning.
People from all backgrounds and financial circumstances need to have a tailored financial plan in place that can evolve and provide protection when times are tough.
There are three basic stages, or building blocks, towards financial independence which anyone can work towards.
Keep some cash in instant access accounts, build this up where possible and aim for at least six to 12 months’ income. This will help with the cost of unplanned expenditure such as car repairs.
It can be tempting to think that by opting out of paying into a pension you will have a larger pay packet at the end of the month. However, it’s likely your employer is required to pay into your pension, which they are unlikely to pay if you opt out. The government may also be paying in the form of tax relief on your personal payments.
If you are worried about finances at the end of the month, before reducing your pension, consider your spending and whether you are receiving all the necessary help.
A simple review of your expenditure will involve:
- Reviewing your standing orders and direct debits - most banking apps or online banking allows you to monitor your regular payments.
- Do you have debts or credit cards with high interest rates? Charities such as StepChange (stepchange.org) can help with this.
- Are you receiving the state benefits to which you are entitled? You can check this via Entitledto at entitledto.co.uk.
This stage involves protecting the essentials:
- Should you have life cover to pay off your mortgage if something unexpected happens?
- Have you considered how long your sick pay would continue to be paid for (or do you have any, especially if you are self-employed)? Income protection can top up your state benefits in the event of being unable to work.
Can your family afford to go without your income for a long period or indefinitely? What would happen to you and your family members if a series of unfortunate events were to unfold?
Around one in 20 school age children will either lose a parent or both parents by the age of 16. Do you really want to run the risk if you are a parent? The Department of Work & Pensions and the Department of Health and Social Care estimate over 100,000 every year leave the workforce after a period of long-term sick leave.
Ensuring you have such protection in place is all part of the financial planning process. You may be entitled to some life cover and income protection insurance as well as other benefits from your employer.
Once you’ve completed steps 1 and 2, you can start to think about longer-term goals such as:
- Are you saving towards a house? If so, how much do you need and when do you want to do this? This can affect whether you should hold mainly cash or consider investing.
- Are you approaching retirement? If so, in addition to your pensions, what else do you have saved/invested to help?
- Could you change where you are saving or use existing savings to invest over the long-term?
- In terms of your existing pensions and investments, do you know how much you are paying and does this represent value for money?
- Have you checked your state pension age and the amount due?
- What are you investing in? Is it too risky or appropriate for your circumstances?
- Are you in the fortunate position that you can help your children/family or a charity and want to know how inheritance tax can affect you?
- Are you looking to sell a business and want to plan what to do next? Should you look at investing and what is the impact on selling your company?
Stage 3 of the process is where my colleagues and I can add most add clarity, value and peace of mind.
Generally, people at this stage are “time poor” and may need help with their finances, in terms of understanding what they have and what they need to do to ensure they are on track to meet their financial goals and be better prepared for any setbacks.
We can also help with inter-generational planning. If you are concerned about the estate of an elderly relative to whom you are heir or co-heir to their estate, we can help mitigate inheritance tax and potentially increase the amount the heirs will receive.
While there is no roadmap for the current crisis and many people are facing unprecedented challenges, we believe that timely and targeted advice can make a real difference.
If you would like to have more detailed conversation, please contact me on 0117 376 2241 or visit our website at www.smithandwilliamson.com
Photo: Tim Blowers of Smith & Williamson
About Smith & Williamson
Smith & Williamson is a leading financial and professional services firm providing a comprehensive range of investment management, tax, financial advisory and accountancy services to private clients and their business interests. The firm’s c1,800 people operate from a network of 11 offices: London,
Belfast, Birmingham, Bristol, Dublin (City and Sandyford), Glasgow, Guildford, Jersey, Salisbury and Southampton. Smith & Williamson is part of The Tilney Smith & Williamson Group.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Smith & Williamson LLP
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities. A member of Nexia International.
Smith & Williamson Financial Services Limited
Authorised and regulated by the Financial Conduct Authority