Last weekend saw the clocks spring forward and the weather take a seasonal turn for the better. But just as we’re ready to escape to the great outdoors, we find ourselves under lockdown with only government-mandated exercise and necessary food and medicine shopping allowed. While the global crisis intensifies around us, we need distractions to focus our minds on more positive things.
Many will turn to spring cleaning, decluttering and DIY task lists – at least it’s a way of trying to take back control! But spring cleaning doesn’t have to mean domestic drudgery. There are other ways to put your house in order and all this time could be the opportunity you need to tidy up your finances.
Here are four easy steps for taking control of your financial future.
- Tax matters
With the end of the current tax year just next week, it’s worth exploring whether you’re entitled to any tax allowances and reliefs. Have you taken advantage of your annual tax-free ISA allowance? Are you making the most of your pension savings? Following the March 2020 budget, you are still allowed to put up to £40,000 into your pension each year, although this may be lower if you now earn over £240,000 (an increase from £150,000), or have started to draw down your pension. However, lifetime allowances were not changed dramatically – something to be conscious of when putting more into your pension. In addition to the valuable tax benefits of pension saving, some pensions can also be passed on to the next generations outside of your estate, so free from inheritance tax. It’s always advisable to take specialist tax advice based on your own personal circumstances, as tax rules can be complex and subject to change.
- Sort out the paperwork
These days most of our financial dealings are done online, but there are still documents we need to keep. Official records, such as wills, share certificates, and birth and marriage certificates should be kept safely together in a secure place where they can be easily found by you or the rest of the family, when necessary.
If you don’t already have a will, one of your first priorities should be to make one. If you have one, you should ensure it’s kept up-to-date with your current circumstances. Any couples with estates including relevant assets over £950,000 should seek the guidance of a qualified adviser as inheritance tax will probably be due. Anyone with assets overseas may need to seek additional specialist advice in that country.
The rules for how long you need to keep financial paperwork depend on the type of document. If you’re self-employed, it’s important you keep all your business records for at least five years, but for personal tax documents in the UK, the HMRC recommendation is 22 months from the end of the tax year they relate to.
- Take a look at your spending
Sorting out your paperwork may reveal costs and commitments that you had long forgotten or are now conscious may no longer be needed, given you can’t use them. Take a look through your bank and credit card statements and make a list of your regular outgoings, you could find you’re still paying out for things you never use, such as gym memberships, news subscriptions, or numerous streaming services. Under our current lockdown, however, access to a wide choice of box sets and online streaming services may be worth hanging onto, at least in the short-term!
By getting a picture of what you regularly spend and cancelling payments for services you no longer need, you will have a much clearer view of your regular cost of living. By mapping your monthly costs over the course of a year, and comparing it to previous years, you can track your changing spending patterns and estimate your own personal inflation rate. If you pay school fees or enjoy fine dining, for example, you may find your personal inflation rate is somewhat higher than the current UK consumer price index (CPI) of 1.7%. Knowing this provides a useful starting point for addressing your future financial needs.
- Time to reflect
One of the few things most of us have gained from this unprecedented situation is time. There is nothing like a life changing event to make you reflect on what you want from life, for your future and for your family. What are your long-term goals and how do you plan to achieve them? Do you want to retire early? Do you want to leave a legacy for your children? It is never too soon to start talking with your family about your values and aspirations. And this is where we can help you – albeit over the phone or a web camera for now – with support for succession planning, preserving your wealth across the generations to come, as well as heading off any potential family disputes in the future.
Above all we would encourage you to use the time we now have at home to talk things through with your families. Usually, we are all too busy to sit down together and discuss what’s important to each of us. I know I am having more of these conversations with my clients, and how valuable they can be – not least as they may mean there is a better understanding of your finances and what you can achieve for the time when the coronavirus measures are relaxed.
At Nedbank Private Wealth, we can work with you to make more informed and tangible financial decisions for your future. Our cash-flow modelling software helps you plan and adapt to real life events by highlighting whether your future income, from investments or other sources, will cover your anticipated financial needs. To find out more about our specialist wealth planning service, please complete the form below, or contact your private banker or our client services team on +44 (0)1624 645000.
Were you interested in finding out more about our wealth planning expertise?
Kim has over 16 years’ experience in the financial services sector and joined the bank from HSBC, where she focused on premier client relationships.
Kim supports her private clients with appropriate advice based on their investment objectives and tolerance to risk on an ongoing basis. She also works closely with our client services team to ensure our clients receive high levels of service for their banking, lending and investment management requirements. She is a Chartered Wealth Manager and a member of the Chartered Institute for Securities and Investment.