“I don’t have the time!”…“I’m stressed out enough as it is!”…“I’m an ignore-what-I-don’t-understand kind of person”; they are just 3 of the more common reasons why so many medics neglect to regularly review their financial situation.
OK, so they may be plausible excuses but answer this: On a scale of 1 to 10, how hard do you work to earn your money? Using the same scale, how hard do you want your money to work after you’ve earned it?
If you answered 5 or above (10 being extremely hard), here are just 6 of the more common reasons why you should not be putting off reviewing your finances any longer!
Reason 1: The end of the tax year is nigh
Your allowances and tax reliefs: I am still amazed at how many people leave money exposed to tax for another year when a simple bit of administration would keep HMRC from taking more of your hard earned money off your tale.
Now is your last chance to make use of your annual allowances and tax reliefs before they disappear on April 6th. If you don’t, you could:
- Miss out on valuable tax-free ISA savings and pension opportunities;
- Lose important capital gains tax (CGT) and inheritance tax allowances;
- Incur totally unexpected annual and lifetime pension allowance tax charges.
Your tax bracket: There is also the chance to be proactive. If you have found yourself tipping into a higher tax bracket – one of the most popular reasons our clients request a financial review – there may be opportunities to lessen the blow, but (and it’s a big but) time is running out fast to take action.
You may even be oblivious to the fact that, come April 6th, you will be in a higher tax bracket. Changes in second property ownership rules, for example, are going to force 440,000¹ landlords up a tax bracket.
Reason 2: The start of a new tax year is nigh
Get ahead of the game! If you plan to invest and make the most of your allowances, why wait until the end of the tax year? In the words of a famous sports brand “Just Do It”.
By sorting your finances out early with your financial adviser, you can just sit back and relax for the rest of the year.
Your adviser will also be able to explain how all the changes that are coming into effect impact your tax, income, expenditure, and/or investments. You never know, they may mean your plans need to be altered or new arrangements need to be put in place.
Reason 3: You are now the youngest you will ever be
In the words of Eleanor Roosevelt, “Today is the oldest you’ve ever been and the youngest you’ll ever be again.” Birthdays in the financial world can open some doors, close others and make many things more expensive.
Saving opportunities: The forthcoming ISA changes are a prime example of new doors opening for the young – in case you were wondering I now class anyone under 40 as ‘young’!
For those medics who still remember being 40 but with a somewhat jaded memory, these same ISA changes may open up opportunities to draw on a pension – I knew there had to be a plus side to the birthday cake now looking like a bush fire!
Rising costs: The older we get the more expensive certain products become. Protecting your family or a mortgage debt and making sure that your children don’t have a huge inheritance tax bill when you die are two prime examples.
The longer you leave putting protection and inheritance tax plans in place, the more problems can arise and the more costly it all becomes.
More choice: A birthday may also present new choices. At age 55, for example, you can access pension funds if you need to. At age 18, you can open an Equity ISA. State retirement age now varies depending on when you were born…what is your date?
Reason 4: Are you paying the right amount of tax?
Are you paying too much tax, too little tax, or you simply don’t have a clue? Are you entering an unwelcome tax bracket, have unknowingly not claimed all the expenses you can, or are completely unaware of the raft of new pension legislation that is already and soon will be in force?
By reviewing your finances with your financial adviser, in conjunction with a good accountant, you could end up paying less tax or, better still, be due a tax refund. We have even come across cases where clients have received a tax bill but, after looking into it, found it to be an error!
Reason 5: Are your investment plans on the right track?
Life changes and with it your financial aims and goals. It can be anything from children staying on the payroll for longer than expected through to a change in how you feel about work.
- Do your financial plans remain in line with your objectives in life?
- Are the investments that you are making or have made still appropriate for your circumstances and future plans?
- Are you getting the best rate of return on your savings and investments and is this return being taxed?
- Do your savings and investments still reflect your appetite for risk?
- What costs and charges are you paying?
The questions go on and it is wise to check that you know and are happy with all the answers, especially if you haven’t assessed your existing plans for a good few years.
Had we known in January 2016 that, by the end of the year, we would have voted to leave the EU and Donald Trump would be the next US Presidential election, many may have decided to cash in their investments and run for the hills. Yet early 2017 saw many major equity markets push new highs.
There are always headwinds with investing, so it’s important to regularly check that any savings and investments you have reflect your current attitude to risk, remain appropriate for your future plans, and give you the best possible rate of return.
We often come across clients who have set up a savings plan or invested a lump sum and just left it. Sound familiar?
Reason 6: Practice what you preach!
We are always hearing from our doctors and dentists how important it is to have a regular check-up, so that we maintain our health and wellbeing and catch any issues early.
With no disrespect to our wonderful dentists, nobody likes going to the dentist – even for a simple check-up – and yet if we don’t go, what state would our teeth and general health be in? We all know we’ve done the right thing when we come out of the dentist’s chair (most of the time anyway!). It’s the same with reviewing your finances.
Meeting with your financial adviser may be time consuming and you will almost certainly be able to think of better ways to spend your time, but you (and your finances) will be glad in the end that you did make that appointment. And for our part, we do our best to make sure that you enjoy, not endure, the experience!
In short, don’t put off to tomorrow what you should have done yesterday. Review your finances at least once a year, preferably around this time – a financial spring clean so to speak – if not before, especially if something big has changed either with your own personal circumstances, your work situation, or the economy.
Be honest, when was the last time you had a good look at your finances? Let us know by adding a comment below.