A dictionary will tell you that Money is just a medium of exchange. You cannot eat a bank note or build a house out of them.
But it can turn hard work into a home, creativity into entrepreneurship – a desire to expand your horizons into life-changing experiences.
Successfully managing your finances isn’t about money – it’s about choices – the ones you have made and the ones you will have to make in future
To begin making a successful plan, you need to ask yourself one question – What do you really want?
Most of us know we need to have some form of savings. The harder part is knowing where to start and what type of savings we should have.
Our approach is designed to help you understand what type of savings and investments are available, which of them best suit each of your needs and to define what risks you are taking.
First things first
- Emergencies and Unforeseen Expenses
Holding funds for essentials is key to building a solid financial base. Too many people end up with short-term debt at high rates of interest. Often using minimum monthly repayments, so the debt lasts longer.
Car breakdowns, new boiler, illness causng time off work….. and so on
If these are covered, you are already ahead of most of the population.
Making sure you can continue to afford to save is an acute part of making sure you reach your goals. Stopping or early encashment might be necessary, but if you have emergencies covered and the right levels of income vs savings, the long-term benefits of consistent savings have much better opportunity.
- Understanding risk
We use a simple set of principles to guide you and provide appropriate strategies;
Do you understand the risk you are Willing to take?
Do you understand the risk you are Able to take?
Do you understand the risk you Need to take?
We have various elements to our assessments, which include, Risk Profiling technologies, that provide you with a robust and repeatable review process, using analysis and forecasting calculations.
We will provide you with a comprehensive outline of your percieved risk profile, showing what types of investments would likely meet your needs, ending with a recommended portfolio that take into account the 3 totems above.
- Your existing savings and investments
To determine the suitability of your current plans, ask yourself the following questions;
- What is the required return?
- What risk are you taking to get the return?
- What costs and charges are you paying?
- How often is it reviewed?
These need to be understood prior to sleeping easy in the knowledge that your savings are in the right position.
- Regular reviews
The economic cycle is an ever-changing beast, lifestyle needs can be forced upon you at anytime.
10 years ago, could you have predicted Brexit?
5 years ago, could you have predicted the fall in Sterling?
Can you predict where Interest Rates will be in 2 years time?
Re-visiting your decisions is a fundamental part of financial planning. Taking a consolidated review of the decisions you made when you started your savings plans and comparing them to your expected outlook at regular intervals will make sure you do not have any unexpected shocks at a point when you cannot repair.
Know what’s right for you
Just because something works for someone else, does not mean it is right for you
Keep a wide spread of asset classes (cash, stocks, bonds) across industry sectors and global regions. The premise is generally that if one is going down, another might be going up
- Ignore timing – Invest for the long-term
It is largely fruitess trying to invest at the bottom and sell at the top. Similarly, chasing short-term profits by switching and turning over investments quickly can be expensive and increase risks.
Use a correlated portfolio of asset classes, allow them time to grow, allow for costs and inflation and maintain steady and consistent contributions
- Pound cost Averaging
Paying regularly has good advantages on a long-term investment, not only does it instill a sense of discipline to one’s investment habits but also avoids trying to second guess market movements.
Essentially, when investing in an investment fund, your contribution buys units. When markets rise, you would buy less units, and when they fall, a higher number will be purchased.
As most investment funds fluctuate on a regular basis, your unit purchasing power does the same. This process is called ‘pound cost averaging’ and it can make for a smoother ride over the longer-term.
- Don’t chase returns
Don’t be worried about taking a profit. Short-term markets can create artifically high peaks at which time it doesn’t hurt to take some out or switch to a different, lower volatility asset class.
- Never buy what you don’t understand
The history of investments is littered with over-promises and ‘the new thing’. I have seen many clients trying to save their pension and investments after investing in failed overseas property empires, burial plots, gold dust schemes ……
If you do not know what you have bought, who owns it and how it can be valued and sold on – don’t buy it
- Know when to quit
Somettimes you have to cut your losses. If your investment is not growing, while the peer group is, you need to take stock and find out why.
After the Dotcom boom and bust, many investors held shares in companies that no longer existed, as did many fund managers. To regain, would take years, so you either cut your losses and switch to a sector showing better prospects, or you wait
- Review your portfolio regularly
Your objectives will change over time, as will your risk appetite, income and life in general
Markets, economies, fiscal policies, political parties, taxation, will also change over that same time period
You have to remain focused on your objectives and whether or not they, and therefore, your investments also need to change.
- Don’t believe everything you read
Headlines can be just as misleading without investigation as they are in all sections of the media.
Using our services helps you keep a clear head, remain focused on your objectives and get the most from your savings and investments
Many Parents and Grandparents seek to build savings for the kids to fund education needs, house deposits (these are probably the expensive reasons)
Often the issue of control is acute and there are options whereby the child does not know the savings exist until you choose.
We often help to draft Trusts to help with Inheritance Tax issues, while also maintaining some element of control over the life of the savings pot
The policies below are the main types currently available;
Individual savings accounts (ISAs) are now available to children, and are known as Junior ISAs. These are long-term, tax-free savings accounts – however, Junior ISAs are only available for children up to the age of 18, and the money cannot be withdrawn until the child’s 18th birthday. Anyone can contribute to the account, although the total amount that can be invested during a single tax year is capped at £4,128 (2017/18)
Child Savings Bonds
These are offered by friendly societies and allow parents, grandparents, other relatives and friends to all save up to £25 a month on behalf of each child with the benefits then being earned free of further tax. The bond must have a minimum term of 10 years, up to a maximum of 25 years. The contributions must be maintained to earn the tax benefits. However, they do offer a valuable alternative, particularly if you are not the child’s actual parent.
These are a niche choice for investing for children, but can provide a solution in certain circumstances. Investments into a pension attract tax relief on the way in, but tax is payable on any income received.
You can contribute up to £3,600 gross every year in a pension on behalf of your child. That will cost a basic-rate taxpayer just £2,880 as the government adds tax relief, but the child will not be able to access the money until they are 55 (2017-18)
Life Company Regular Savings Plans
These tend to be used by relatively sophisticated investors, particularly expats and international executives. Investors can use them to build up a tax-free lump sum and then assign segments of it to their children. These segments are usually paid out tax-free as long as they fall within a child’s tax-free allowance but, in the meantime, the policyholder retains control of the investment policy. However, minimum investment levels may be higher than some other options.
Designated Investment Accounts
These are a good alternative to a Junior ISA, if you wish to retain control of the investment once the child reaches 18. These are simply held in the Parents name(s) and are Designated for the child, and until the parents (or grandparents) decide, the investment is held without the knowledge of the child.
Child Trust Funds (CTF)
Although CTFs were stopped in 2010, millions of parents still have active CTF accounts for their children. Parents, family and friends can add a total of up to £3,600 to the account each year. There is no tax to pay on any income or any gains from the fund. The account remains in the child’s name and they will ultimately have control over how it is spent.
Legislation over the past few years has eroded many of the tax-planning advantages of trusts. In general, these are now used to control access to the funds rather than for tax planning.
Income and capital gains are treated as those of the children, which means that they can use all their allowances each year. It also gets round the problem that children cannot hold shares in their own name.