Preparing for the new financial year: nine tips to set you on the path to success

Budgeting

1. Audit your spending

When you’re looking at your budget, begin with an audit of your average monthly income against your fixed and variable expenses. Putting together a realistic budget is the basis for working towards your financial goals, such as the value of your pension pot, your investments, and any large purchases you have planned.

Having worked out your financial priorities for the coming year, you’re in a good position to re-evaluate your budget. For example:

• Are you being over-extravagant in any particular area? Maybe you eat out frequently or buy services you could do without.

• Are you getting good value from your services and subscriptions? This might be your mobile phone provider, a gym membership, or a magazine subscription.

2. Debt management

Debt is a tool that most of us use at some point, and it’s an integral part of financial planning.

Some things to consider include making additional debt repayments, consolidating existing debts by taking out a lower interest loan, or swapping to a 0% interest credit card to help you reduce the balance quicker.

3. Emergency fund

An emergency fund is a pot of accessible money that can be used in the event of an emergency or catastrophe. The current economic climate might mean that you need to review your emergency fund and make sure that it is still adequate.

Without a sufficient emergency fund, you may be forced to liquidate some of your assets to pay for an unexpected expense, which can have consequences for your long-term financial goals. For example, if you urgently had to sell some of your portfolio at an unusually lower price than you might’ve done had you been able to sell the asset at an attractive level.

If you need to dip into your emergency fund, start topping it up again as soon as possible.

Your financial goals

4. Reviewing your goals against your current position

Regularly reviewing your financial goals against your current position and the decisions you made in the last financial year is an important aspect of ensuring you achieve the targets you’ve set. Be it saving for retirement, a large purchase like a bucket list holiday, or to be able to help your children with the purchase of a property, reviewing these goals on a yearly basis will help to keep you on track.

Perhaps you are now able to increase your pension or other savings, in which case talking to us can help to decide how best to allocate these new funds.

5. Cashflow forecast

Cashflow modelling is an important aspect of setting financial goals and keeping you on track. Forecasting is ideally suited to those who are settled down and have a clear end goal that they want to plan for, such as putting children through private education, or nearing retirement.

Even if you have had cashflow forecasting carried out in the past, it’s important to review this yearly to account for changes in expenses, the economic climate, and your goals. Inflation and other political and economic influences could lead to higher prices for certain products and services. And there might be additional expenses. For example, you might be spending money on sports training or music tuition for your child, or if you’re planning to get a new pet, there’ll be vet’s bills, pet insurance, and pet food.

We use top quality software to complete a forecast for you, which you can then use to plan for reaching your goal.

6. Pension

Whether it’s a personal pension or a workplace pension, most of us rely on them for at least part of our retirement plan.

A few points you can check on your personal pension for the new financial year include:

• Having created a cashflow forecast, could you afford to increase your pension contributions?

• Based on the performance of your pension’s investments and any changes to your risk tolerance, should you consider making investment changes?

• Is it worth consolidating your pensions into one pot?

• Review your death benefits and named beneficiaries. Is all documentation up to date?

Investments

7. Diversifying your portfolio

There’s some degree of risk in all investments, so it makes sense to spread the risk by investing in a diverse range of products, companies, and sectors. Your financial adviser may suggest that you diversify your portfolio depending on how it has performed and the level of risk that you’re comfortable with.

8. ESG investment

In the last few years, environmental, social, and governance (ESG) criteria have very quickly become a significant factor in choosing investments. In a 2021 ESG global survey, it was found that 22% of investors incorporated ESG into all or most of their investment portfolios – a sharp rise from two years before, when not a single respondent reported incorporating ESG into all their investment decisions.

ESG indices measure the perceived environmental, social, and governance performance of companies. Criteria include:

• Carbon emissions

• Product carbon footprint

• Water sourcing

• Land use

• Raw material sourcing

• Packaging waste

• Health and safety practices

• Worker training

• Company and supply chain worker standards

• Product safety and quality

• Consumer financial protection

• Privacy and data security

• Responsible investing

Insurance

9. The risk of underinsurance

In the event of a claim, underinsurance can be expensive. Brexit, the pandemic, and the war in Ukraine, have all caused rebuild costs to increase dramatically, leaving millions of policyholders at risk of underinsurance. It’s important to remember that the sum insured on your building insurance policy should be the rebuild cost, not the market value of the property. This applies to both residential and commercial property.

In the event of a claim, if your insurance provider discovers that you’re underinsured they could apply the average clause which would reduce the value of your payout according to the percentage that you’re underinsured by.

It’s advisable to revisit your policies’ sum insured and reassess the rebuild value of your property to protect yourself from underinsurance. Otherwise, a claim could prove much more costly than you were expecting and be a setback to achieving your financial goals.

The value of professional financial advice

Whether you’re looking for advice on investments, pensions, or insurance, or if you simply need some guidance on creating a financial plan, one of our experienced and qualified advisers can help you to make informed decisions.

Contact Alan Boswell Group on 01603 967967 for expert, independent, financial advice.

The value of investments and any income from them can go down as well as up and you might not get back the original amount invested. The past is not a guide to the future.