Ready to plan for your financial future while still working and saving?

Busy, busy, busy doing something

You’re busy. Your professional career or business may have really got going. But just as your earnings and savings capacity are increasing, your time to sort out your finances is decreasing.  

You may even have a rising sense of uneasiness about your financial future when you stop working. 

Get organised!

Of course, the more money you have, the more important it is to sort it out. And getting organised will make a big difference.  

Taking time now to nail the basics, can make an enormous difference to you and your family’s life later on. It’s your money, don’t be afraid to ask questions or worry about looking stupid. You’ll feel much happier when you get everything in order. 

Outgoings getting out of hand?

Look for any wastefulness in your financial life. Do you know what you’re paying, who you’re paying, and what it’s for? Are you getting the best deals on everything you buy? Are you even using everything you’re paying for? Examine your statements and check everything makes good financial sense. 

Generating enough for the next generation

If you have children, you probably spend even more time worrying about their lives than you do yours. What job will they have? Will they meet someone? Will they be able to afford their own home? And this all comes at a price. In the UK, average private day school fees have reached over £15,000 per year¹, while university fees are around £9,000 a year². That’s before all the hobbies, holidays and extras of life, so think about your financial priorities and factor them into your plans. 

And the generation before

At the other end of the life spectrum, the older generation in your family may have invested heavily in you, and you may want to look after them when they need it. Paying for care costs on average over £1,000 per week in the UK for residential, depending on the region³. If there were additional bills involved, would you and your family be able to cover them? 

An inheritance

At this stage of your life, you may find you inherit something significant. You could think about what the person that bequeathed it to you would have wanted you to do, or perhaps set up a trust to benefit future generations.

If you have a large lump sum you’d like to invest, it could be a good moment to speak to a financial adviser.   

The big pay-off

One thing you could do with a lump sum that comes your way is pay off any debt.  

It’s generally (but not always) more cost-effective to prioritise paying off debt over building up your savings. If you have lots of loans, or debt, it’s important to understand what you are paying and how you can realistically consolidate and reduce the rates paid.  

Generally, longer term debt is cheaper, so if there's a credit card you're not paying off, ensure that its payment plan is moved from expensive unsecured borrowing to a repayment plan where you save considerable interest. 

Save sooner  

When it comes to saving and investing, the sooner you start, the more money you’ll have and the more that money can grow.   

Imagine the good life

Before you can get properly organised, you’ll need to think about you and your family’s future in a more general way. Upsize? Downsize? Work more? Work less? Change career? Retrain? Start a business? Study?

If you want to set some financial goals, you must have some idea of what it’s all for. Think about what is important to you. It may not all be possible, but it’s a good starting point. 

Plan for the good life

Thinking ahead is one thing, but getting organised to invest your money is another. You’ll need a plan. Of course, things can change, but if you make a plan for it, the odds of something good happening are higher.

If you decide you want to speak to a financial planner, then bring your vision for the good life with you – along with details of all your current assets and financial commitments too. Through cash flow analysis, you and your financial planner can look at your current assets and project where you would like them to be in the future, depending on your choices and external factors involved. 

Here are some things to consider:

Build wealth and pay less tax

Any money you don’t immediately need, you could invest to potentially achieve long-term growth. There is risk associated with investing money, but it has the chance to grow into something more substantial over the longer term. Even a modest amount of inflation reduces your spending power over time. People in retirement are especially vulnerable. Of course, any money you make is a target for tax and the government has created some tax-efficient ways to save or invest to make sure you don’t pay more tax than you need to. 

Pensions  

By saving in a pension, whether it’s through your workplace or a personal pension (like a SIPP – a Self-Invested Personal Pension), you can reduce your tax bill while you save.  

You can also tap into the expertise of investment managers, although if you’re a knowledgeable investor yourself, you may wish to have more control. You might have specific concerns about risk or investment choices, for example. Even if you do, staying in a company pension may be better if your employer is making payments for you. 

Tax relief

If you’re an additional rate taxpayer earning over £125,140 a year (paying income tax at 45%), to save £100 in your pension, you only need to pay in £55. That’s £45 of free money! But there’s a catch – you must wait until you’re age 55 (rising to age 57 in 2028) to access your cash.  

There are also limits on pension tax relief. In the current tax year, you’re allowed to save £60,000 tax free.

You will eventually have to pay income tax on the money you take out from your pension, but by then you may have earned less money and be in a lower income tax bracket. Additionally, years of growth may have benefited your funds. 

ISAs

Individual Savings Accounts (ISAs) are another tax-efficient way to save. You can save £20,000 in the current tax year, and you won’t have to pay any tax on interest earned when you want to take it out. You can access it whenever you like.  

Everyone gets an ISA allowance, so don’t forget to use your partner’s too if possible. Children also have an ISA allowance of £9,000, but it’s locked away until they’re 18.  

An ISA can be cash, or stocks and shares, or a combination of both. 

Invest your way

Pensions and ISAs are the most tax-efficient ways to save, but when you’re up to your saving limits on those, there are plenty of other investment options.  

You could invest via pooled funds or direct in company shares. There are funds that focus on particular geographies, sectors and investment philosophies. You could invest only in companies that show responsibility to the social or physical environment or support particular values. This doesn’t necessarily compromise expected returns.

Whatever you decide is the best way to invest, choose a variety of investments to ensure you’re spreading the risk and maximising your chance of success.

If you don’t have the time or interest for research and investment management, you may like to ask for investment advice. It’s easy to keep up to date with your portfolio if managed by an investment manager with online access to accounts. 

Face the fees

Remember to factor in fees. These can be for transactions, or time spent by investment managers, advisers or custodians. If you’re investing for growth, with rising numbers compounding over the long term, fees can make a huge difference. Fees can be based on a percentage of the value of your portfolio. 

Home, profitable home

With no capital gains tax to pay on your primary residence, this can be a tax-efficient way to invest. Second homes have also proved popular as an investment, but you will have to pay tax on any earnings or increase in value.   

Time for an advice upgrade?

As the years pass and your wealth grows, the task of wealth management becomes more prominent, with every financial choice having increased potential consequences. Don’t be tempted to stick with what you’ve always done if circumstances are now different.  

Make sure your financial plan is a comprehensive picture of your current finances, your financial goals and any strategies you've set to achieve those goals. The more money you have, the more you could benefit from professional wealth planning advice.

Protection for the unexpected

Unfortunately, a significant number of marriages end in divorce. If you’re going through a divorce, this could be a good time to ask for not only legal but also financial advice.

It is never a bad idea to protect yourself against the unexpected. Life, health and disability insurance can help make the hard times in life that little bit easier.  

Enjoy the rewards

Good financial planning can make a big difference to your lifestyle and your mindset. An adviser can empower you to analyse your situation and make quality life decisions.  

So perhaps what is even more important than having more money and freedom is being able to sleep at night in the knowledge that your finances are in order and in line with you and your family’s goals and values.

Sources
1 Independent School Council - Census and annual report 2022
2 Statista - UK private school fees 2023
3 Carehome.co.uk - Care home fees and costs: How much do you pay?