Sun, Sea and Strategy! Using the Summer to review your finances
As the summer sun shines and many of us enjoy a well-deserved break before returning to work, school and autumnal routine, it could be an excellent time to take stock of your financial health. A summer financial review can ensure that your financial plans align with your current and future goals, and it can highlight areas where adjustments might be necessary. Here’s a guide to the key financial plans you may consider reviewing during the summer.
1. Investment Portfolio
Summer is a great time to review your investment portfolio. Market conditions can change rapidly, and your investment strategy should reflect your current risk tolerance, financial goals, and market environment. Key considerations include:
Asset Allocation: Is your portfolio balanced appropriately between equities, bonds, and other asset classes? Over time, portfolios can drift from their target allocations due to varying returns across different investments. Rebalancing can help maintain your desired risk level.
Performance Review: Assess the performance of individual investments against benchmarks and your expectations. Are there underperforming assets that need to be reconsidered or replaced?
Fees and Costs: Review the fees associated with your investments. High fees can significantly impact long-term returns. Consider if there are lower-cost alternatives that might provide similar or better returns.
2. Pension Planning
Pensions are a critical part of retirement planning, and a summer review can ensure that you are on track to meet your retirement goals.
Contribution Levels: Check if you are maximizing your pension contributions, especially if you have received a pay rise or bonus. Contributing more now can take advantage of compound growth and tax relief benefits.
Investment Choices: Evaluate the investment options within your pension plan. As you get closer to retirement, you may want to shift to less volatile investments to protect your capital.
Retirement Age: Are your retirement plans still realistic? Changing personal circumstances
3. Insurance Policies
Life changes, and so do insurance needs. A summer review is an excellent time to revisit your insurance policies to ensure they still provide the necessary coverage.
Life Insurance: Have you recently gotten married, had a child, or taken on a mortgage? Ensure your life insurance policy reflects your current needs and provides sufficient coverage for your dependents.
Home and Contents Insurance: Review your home and contents insurance to make sure it covers recent purchases or home improvements. Also, check that your cover amount matches the current value of your home and belongings.
Health Insurance: If you have private health insurance, review your plan to ensure it covers any recent changes in your health or lifestyle.
4. Tax Planning
With the tax year starting in April, summer is a good time to assess your tax position and plan for the upcoming year.
Tax-Efficient Investments: Are you maximizing the benefits of ISAs, pensions, and other tax-efficient savings? Review your accounts to ensure you are taking full advantage of any available allowances.
Capital Gains and Losses: If you have sold assets or investments, calculate any capital gains tax liabilities. Similarly, if you have made losses, these can be used to offset gains and reduce your tax bill.
Inheritance Tax Planning: Review your estate plan and any potential inheritance tax liabilities. Consider making gifts or setting up trusts to minimize the impact of inheritance tax on your estate.
5. Mortgage Management
Managing debt is a crucial component of a sound financial plan and mortgages are usually the largest type of debt many clients have during their lifetime. Summer can be a good time to review your debt and develop a strategy to manage or eliminate it.
Interest Rates: Are you paying more in interest than necessary? Look at your total liabilities including loans, credit cards, and mortgages to see if there are better rates available. Consider refinancing if you can get a better deal.
Repayment Strategy: Review your debt repayment strategy. Are you paying off high-interest debt first? Are you making more than the minimum payments to reduce your overall debt burden?
6. Budget and Spending Review
A thorough review of your budget and spending habits can help you identify areas where you might cut back or allocate funds more effectively.
Spending Patterns: Look over your spending patterns from the past few months. Are there any areas where you are overspending? Are there subscriptions or services you no longer use?
Savings Goals: Evaluate your progress towards your savings goals. Are you on track to meet your short-term and long-term objectives? If not, consider adjusting your budget or finding ways to increase your savings rate.
A summer financial review is a proactive way to ensure your financial plans remain aligned with your goals. By taking the time to assess your investments, pension, insurance, taxes, debt, and budget, you can make informed decisions that enhance your financial well-being. Remember, it’s always beneficial to consult with a financial adviser to tailor your review to your specific circumstances and get professional advice on any complex matters.
At Markland Hill Wealth, we have a team of vastly experienced independent financial advisers who are passionate about creating robust financial plans for their clients. If you would like to create or review your plan with us at this time of year, please get in touch.