For some 2020 vision on your money over the next 10 years, your best bet is an independent financial adviser. Look ahead to a brighter future with some help from Unbiased’s finest and wisest. Tips compiled by Nick Green.
What are the best ways to build up savings? How much should you spend day-to-day, and what should you set aside for future plans and your pension? What’s the best way to save for your first home? How can you choose the right investments? Most important of all, how can you make a financial plan that will serve you throughout the coming decade?
As we move into the new Twenties, here are some of our top independent financial advisers to answer all these questions and many more.
Tips on financial planning
1. Don’t plan your life around your finances – plan your finances around your life.
Craig Palfrey (certified financial planner at Penguin Wealth).
2. Divide your financial plan into three parts: Essentials, The Future, and Living for Today. Essentials should be around half your income, saving for The Future should be around 20 per cent, while Living for Today might be the remaining 30 per cent. Try to maintain this balance even if your costs and income change over time.
Gemma Siddle (certified and chartered financial planner at Eldon Financial Planning Ltd).
3. Don’t make a resolution – create a system. Promising yourself a reward in the distant future is never going to work. So when you save for a long-term goal (such as retirement) build in a series of smaller rewards for yourself along the way, as incentives for hitting key milestones. Also start small if you have to – just make sure you start!
Adrian Kidd (lifestyle financial planner at Radcliffe Newlands).
4. Changes in habits need to be sustainable. To use a dieting analogy, there’s no point starving yourself for a week if the result is a week-long binge. Use your financial plan to give yourself more control and awareness of what you’re doing, rather than punishing yourself with austerity that you can’t sustain over the long term.
Marcus Dodds (financial planning consultant at Armstrong Watson).
Tips on saving
5. Remember that every £100 you save delivers returns of over 100 per cent. How? Because not only does it generate growth and interest, but it’s also £100 that you haven’t spent – so you’ll always have something on your bottom line to show for it.
6. Look for the marginal gains – small incremental savings such as coffees, lunches and daily luxuries that have cheaper alternatives. Work these small improvements into your lifestyle for potentially thousands of pounds of extra savings per year.
Becky Sugden (chartered IFA at Gresham Wealth Management Ltd).
7. If you don’t need instant access to some of your savings, consider term deposits. These offer a fixed rate of interest on money that is held for a pre-specified period. This will almost invariably better than anything you’ll find on an instant access savings account. Another tip is to look for special offers than give generous interest rates for your first year, and keep switching when the offer expires.
Daniel Ardern (chartered financial planner at Gresham Wealth Management).
Tips on investing
8. The best investment advice you’ll ever get is, ‘Don’t make avoidable mistakes.’ Investing is a long game, so mistakes lose you not just money but time too. And you only have one life, so make every effort to get it as right as possible first time.
9. When doing your own research into investment options, beware of confirmation bias. This is when you only tend to notice information that confirms your existing beliefs and wishes. Also beware of overestimating the accuracy of your own predictions. ‘I want it to happen!’ doesn’t mean it will happen. This is why independent advice is so important.
Jonathan Young (director of Gresham Wealth Management).
Tips on buying a first home
10. If you are under 40, you might want to consider opening a Lifetime ISA (if you have one already, you can continue paying into it until the age of 50). This gives you a 25 per cent bonus on savings of up to £4,000 a year. You should be aware however that the bonus is only retained if the Lifetime ISA deposits are drawn to either buy your first home or after the age of 60 (there is a penalty for withdrawals at other times).
Tips on pension saving
11. Most people save all year for 2 weeks in the sun; what about the 25 year holiday after work finishes?
Steve Shovlin (financial planning consultant).
12. Most of us tend to be pessimistic about our lifespans but over-optimistic about investment returns – which creates an obvious problem when it comes to retirement planning. Think about how long your pension pot might last and also how long you might live, using a life-expectancy calculator. If they don’t match, take action!
Neil Adams (head of pension planning at Drewberry Wealth Management).
13. Review your pension arrangements (because you haven’t done so recently, have you?). Not only do you need to make sure your pension fund is suited to your needs, but you may have old workplace pensions you’ve forgotten about. We often come across pensions that our clients have simply forgotten about, and they discover many thousands of pounds essentially ‘down the back of the sofa’.
Tips on long-term security
14. If you had a cash machine in the corner of your front room that paid you an income once a month, and it was your only source of income, wouldn’t you insure it in case it broke down? Well, you are that cash machine.
Tips for business owners
15. If you’re a business owner, you could make more efficient use of large amounts of cash in your company account. For example, instead of drawing cash as salary or dividends, you could make either regular or lump sum payments into your pension. Not only can this save you income tax, but you are also moving money into an environment free from inheritance tax.
Tips on inheritance
16. If you have a large estate, or own more than one property, your family might lose a sizeable chunk of this legacy to inheritance tax. If you (or an older relative) are in this position, a financial adviser can help you minimise this loss by planning ahead in plenty of time. Remember that this planning can’t usually be done in one go, but needs to take place over a number of years.
Alistair Fraser (independent financial adviser at Cockburn Lucas).
You can contact all of these advisers directly through Unbiased, or search for another independent financial adviser near you.
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