We made it to the end of the year! We would like to think that it was an easier one than the one before, but for many it was not vastly different. The difficulties, financial and personal, that many experienced in 2020 continued into 2021. For those who set financial goals in January, now is the time to take stock and see how you fared. Even if you did not set any goals, you can still look back and determine, on balance, how things turned out from a financial perspective. Either way, an end of year financial review is a good opportunity to see where you are and perhaps set yourself some targets for next year. For a detailed, tailored assessment of your financial year, talk to one of our independent financial advisers at www.plutuswealth.com.
Why do a financial review now?
Well, now is as good a time as any Plus, it is the end of the year, and with setting New Year's resolutions, an end of year financial review is the best place to start. Besides, going into the new year with a fresh perspective is a good way to reset.
We also recommend you review your financial situation after any major life event. This could be getting married or divorced, changing job or moving home. If you are nearing retirement, a review ensures your finances are on track for the forthcoming changes in income. And of course, it is important to know which of your existing financial products may need to be renewed in the coming year.
Celebrate your wins
It has been a tough year for us, again. So why not begin by celebrating your wins, no matter how big or small they may be. For example:
• Debt. Have you paid down any debts, such as credit cards, loans or mortgages? You may have cleared a credit card debt or reduced your mortgage by a few thousand pounds. These are not small feats in a difficult year.
• Pension. Have you been paying into a pension? No matter the size of your contributions, they will not only add up but will also benefit from tax relief. Again, a win in anyone’s book if you are able to save some money for your retirement.
• Savings. Were you able to put some money aside? Even if you were not, but were able to leave savings untouched, they will have gained a small amount on interest over the year. Every penny adds up.
Understand any losses
Wins inevitably come with losses from time to time. If this is something you experienced this year, a review will help to understand why. Things to consider include:
• Investments. If any of your investments made a loss, are there ways to either recover part of that loss or move your money to another product that is performing better? There is never any guarantee when it comes to investment in stocks and shares but understanding the market and its past performance can help plan for the future. In such instances, the advice of an independent financial adviser can prove invaluable.
• Lower income. This could be the result of a job change, coming off furlough or a loss of business in a tough year. You are not alone. Review the reasons why your income is lower and rationalise your expenses to ensure you are not struggling to make ends meet. Again, an independent financial adviser can help with an impartial assessment and advise on how to turn things around.
Steps you can take now to prepare for next year
Armed with this review information and understanding of what is doing well and what has not been performing as expected, here are a few things you can do to prepare for the next 12 months.
• Tax efficiency. Check that you are making the most of the tax breaks available to you and that you are using tax to your advantage. For example, if you are putting money into savings rather than a pension, you are missing out on government-offered tax relief. In essence, this is ‘free’ money that goes directly into you pension pot, growing it without you having to do anything other than contribute.
Alternatively, why put money into a standard savings account when you could be investing it in an ISA, and therefore reaping the tax-free annual allowance? Making the most of your personal allowance can also benefit you if you are earning more than £125,000. Want more tax efficiency ideas? Our article on making the most of your tax allowances is a great place to start.
• Switch products. If you are coming to the end of a financial product – a mortgage, ISA or insurance policy – start to look around early for alternatives. Products are often available for a limited time, and you may find something that is better for you in the longer term that you can switch to if you start looking now. Another option is to put savings into fixed-term products with higher returns; this can work well if you are not likely to need to access them in the short term.
Let us help
If the idea of doing an end of year financial review is overwhelming or frightening, we are here to help. Rather than put it off for another year in the hope that things will improve on their own, we can help you get on to a different track now. And next year’s review could be looking a lot more positive as a result! At Plutus Wealth we have a team of independent financial advisers and specialists who will work with you to meet your goals. Simply call us 020 7871 5200 or write to us at info@plutuswealth.com and we can get your finances working for you.
.svg)
.svg)
