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Your 12 financial goals for the year ahead

Updated 01 December 2022

4min read

Alan Smith

Already given up on the gym and your other resolutions? Here are some simple financial objectives, which will are relatively easy to implement and will help boost your bank balance.

Bank notes

1. Get the taxman off your back

Nearly seven out of 10 Britons do nothing at all to reduce the amount of tax they pay and as a result they pay £4.6 billion in tax unnecessarily. There are many legitimate things you can do, such as making full use of your family’s tax-free ISA allowances, and seeking capital gains tax and inheritance tax advice, that will leave you more of your money to spend on the things you enjoy.  Take a look at the unbiased.co.uk Tax Waste Calculator, to help you take the first step.

2. Work out your net worth

Saving for your retirement is one of the most important things you will ever do. Yet many people don’t know how well their plans are progressing and have no idea what their pension will be worth when they retire. Dig out all your pension and ISA annual statements to see where you stand today and track down any missing investment plans or savings accounts. You might be worth more than you think.

3. Work out what you need to retire in comfort

Just because you’re on a high income now, doesn’t mean you will be well off in retirement. Right now, a single man with £100,000 in his pension pot would be able to buy an annual income of just £5,500 a year. That’s not exactly riches. If he had £200,000, he would generate twice that amount, or £11,000 a year. To get the equivalent of the national average salary in retirement, currently £26,500, you would need roughly £500,000 in your pension pot. And that would only buy you a level income. If you want that income to rise in line with inflation, you will need even more. No wonder many high earners face an income shock when they give up working.

4. Claim your pension tax relief

Pension tax relief is hugely valuable, especially for higher earners. They can get tax relief of up to 45 per cent on their pension contributions, but there is no guarantee this will continue. There is a growing political campaign to cut pensions tax relief for higher earners. Your contributions are subject to an annual allowance of £50,000, falling to £40,000 in 2014/15. Use it if you can. You may also be able to carry forward any unused allowance from the past three years.

5. Consider putting all your investments in one place

It is all too easy to end up with a mishmash of different personal and occupational pensions, ISA and other investment funds, and a string of online share dealing accounts. Consider consolidating your pensions into a single pot, for example, by setting up a self-invested personal pension (Sipp), if you haven’t already done so. Having all the information in one place allows you to monitor and manage your pension and other savings more easily. It also reduces the risk of some of your pot going astray.

6. Review your risk profile

Next, look at where your money is invested. Does it still match your risk profile? The closer you get to retirement, the fewer chances you should take with your money. You might want to reduce your exposure to, say, high-risk emerging markets, and even stocks and shares generally, and switch your gains into cash or bonds. Again, consider taking specialist financial advice, to strike the right balance in your portfolio.

7. Check your life insurance

More than 12 million Britons don’t have a financial back-up plan in case of financial disaster, such as accident or sickness. As a high net worth individual, you have plenty to protect. If you have dependants, such as a partner or children, you should start with life insurance. If you already have life cover, make sure you have taken out enough to protect your family’s lifestyle.

8. Ask whether you need other protection

Life insurance isn’t the only protection you need. You are four times more likely to suffer a serious illness before age 65 than die. One option is critical illness cover, which pays out a tax-free cash lump sum if you suffer a serious illness such as cancer, heart disease and stroke. One in five will go on long-term sick leave during our working lives. Income protection will pay you a tax-free replacement income if you fall ill and can’t continue working. It is vital cover, yet only one in 10 people have it. Ask your adviser what you need.

9. Review your mortgage

The average mortgage rate recently hit an all-time low of 3.47 per cent. If you’ve got plenty of spare equity in your property, you can find deals for as little as 2 per cent or 3 per cent. If you’re paying more than that, it’s time to shop around for a better deal. Say you have a £250,000 repayment mortgage on a 15-year term charging a variable 3.99 per cent. Switching to a five-year fix at 2.85 per cent will save you £8,400 in interest repayments over the term of the deal, possibly more if interest rates rise in that time.

10. Think of the kids

If you’re not saving for your children’s future, start now. If you invested just £84 a month for 18 years, you could build a lump sum of £25,000. Even £50 a month over the same period could build a fund worth nearly £15,000, which would make a decent contribution to a house deposit. And you can invest a lot more than that, without having to pay tax on the growth or income. In the current tax year, you can save up to £3,720 into a Junior ISA, or £310 a month. It’s your children’s future, so get started now.

11. Get strategic

It is easy to get bogged down in the details of your personal finances, but sometimes you have to think a little more strategically. What are your personal aims in life? How long do you plan to carry on working? Would you like to strike out on your own? When do you plan to retire? Would you like to retire overseas or own a home in the sun? The answers to these big life questions could determine how and where you invest your money.

12. Write your will

Writing your will may not be the most optimistic job you could do all year, but it is one of the wisest. Two-thirds of adults currently have no will, however, and many would bequeath financial worries to their loved ones if they died suddenly. If you do have a will, you might need to amend it if your personal or family circumstances have changed. You don’t want to leave a bitter legacy.

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About the author
Alan Smith
Alan Smith is the CEO of Capital Asset Management. His specialisms include: wealth management, strategic financial planning and creative tax planning.