“I’ve been meaning to ask about this for ages” is a statement often heard in our meeting rooms! Dealing with your finances is one of those important, but not urgent, things that is often overlooked until the occurrence of a bereavement, family illness or the realisation that retirement is looming.
Typically, and in no particular order, things on the ‘I must get round to it’ list seem to be:
Wills and Lasting Powers of Attorney – Making sure that your hard earned money goes to those you want it to is part of good financial planning. A good Solicitor should be able to help and can also talk to you about a Lasting Power of Attorney too which appoints someone to make financial decisions on your behalf should you be unable to do so.
Pensions – Recent legislation changes to make pensions more flexible has given an incentive to many to look at their past pensions and decide whether any action should be taken. Sometimes consolidation is a good idea. Sometimes accessing some of the money can also make sense. Often charges can be reduced.
Mortgages and borrowing – It’s always good to keep borrowing under review. Generally lending rates are historically very low at the moment. This can create a dilemma. As borrowing is cheap it is often an incentive to borrow more (particularly for those that do not remember the heady rates of 15% in 1990!) Conversely others may argue that you should repay debt while rates are low to protect yourself against inevitable rate rises in the future.
Savings – While borrowing money may be cheap at the moment it does mean that savers are getting a pretty raw deal. Seeking better returns need not be associated with high risks. Products that provide guarantees, levels of protection or security through diversification can be an alternative that offer the potential of better returns than deposit rates. We are currently reviewing an equity ISA offering that provides guaranteed returns above most cash ISA rates.
Should I buy a property and let it out? – I’ve written before about investing in property having its risks. Memories of the 30% fall in property prices (2007 -2009) have faded. In our experience the full costs and taxation of property rental are rarely factored in to the decision to invest. Furthermore, tax changes in 2017 will limit the tax relief granted on interest paid on a buy-to-let mortgage. The result being that many will pay higher tax on rented property income than is currently the case.
Whatever your circumstances, maybe the New Year is as good a time as any to take stock of where you are now financially and perhaps with the help of an adviser work out whether it can be improved upon to get you to where you want to be.