Once you’ve set out a financial plan, you might think all the hard work has been done. But keeping on top of the progress you’re making and ensuring it’s still suitable is essential for getting the most out of your assets.
When was the last time you revisited your financial plan? It’s a task that you might be tempted to put off or believe there’s no need to complete. Perhaps you have reviewed your finances, but how in-depth did you go? It should be considered just as important and worthwhile as the initial work you did when setting out a financial plan.
Think back just ten years ago, your lifestyle, priorities, wealth and aspirations have probably changed at least to some degree during that time. As a result, the financial plan you created a decade ago may no longer be what’s right for you. Coming back to your financial plan is a key way of making sure you’re still on track financially.
Why review your financial plan?
1. Reflect personal changes: As we’ve mentioned above, your own situation can change significantly. Perhaps you’ve celebrated a pay rise over the last few months, welcomed a new family member or have invested in a second home. These can have an impact on your finances now as well as the best way to save and invest. A regular, full financial review gives you a chance to build these life events into your plan. Even seemingly small changes in your personal life may mean there’s a better route for reaching your goals.
2. Review your goals: This one links with personal changes. Whilst your life may be similar to last year in terms of work and family, you may find that your aspirations have changed significantly. Perhaps you’ve decided you’d like to retire from work in a few years, which may mean you should start increasing pension contributions or reducing investment risk, for example. Taking some time to think about what you want to achieve in life and the role money will play in helping you reach goals can ensure your financial plan is aligned to you.
3. Keep track of progress: Even if your goals remain the same, you should take steps to measure your progress. From saving to purchase your first home to making retirement plans. Despite efforts, even the best-laid plans can face bumps along the way, some of which may be outside of your control. Reviewing how you’re progressing is crucial for ensuring reality and expectations are in line.
4. Highlight potential risk and opportunities: New opportunities and risk are always emerging. A financial review is a perfect time to take a look at these and respond where necessary. You should also take the time to review your current exposure to risk is still right for you. It’s a factor that should be influenced by many different areas, from your goals to capacity for loss, which may also change over time.
5. Take regulatory changes into account: As well as changes to your life, you also need to consider regulatory changes. These can be hard to keep track of, as some will barely be mentioned in the press. From changes to Inheritance Tax thresholds to the Lifetime Allowance for pensions, keeping on top of regulations can be time-consuming. View your financial review as an opportunity to discuss what’s changed and how it affects you with your financial adviser.
6. Consider long-term wealth projections: As part of your original financial plan, you may have projected how your wealth will change over the year through cashflow planning tools. This can provide an invaluable insight that you can base financial decisions on. However, the output is only as good as the information the tool has used to reach conclusions. As a result, the core data needs to be updated and reviewed frequently to continue getting the best out of it.
7. Have confidence in your plan: Finances can seem complex and a cause for concern. But you should have confidence in the decisions you make and the direction that you’re heading in. Reviewing your finances can give you a greater sense of control and you know you’re basing decisions on information that’s up to date.
When should you review your financial plan?
With so many reasons for reviewing your financial plan, you may be wondering when and how often you should undertake the task. Ideally, we advise clients to thoroughly review their finances every year. This makes it far easier for you to keep on top of potential changes and ensure that your financial plan suits your current situation. On top of this, it’s a good idea to review your finances following big life events too, from buying a home or getting married to celebrating retirement.
If you’re ready to look over your financial plan, please contact us.
Please note: The value of investments and the income they produce can fall as well as rise, you may get back less than you invested.
Tax treatment varies according to individual circumstance and is subject to change.