Financial Planning Throughout Life
Welcome‌ What is Financial Planning?
Financial Planning is a six step process:
Financial Planning is not just for the wealthy.
1
Establish your short, medium and long-term goals in life
2
Work out what assets and liabilities you have
3
Analyse and evaluate your financial status
4
Develop your plan
5
Implement your plan
6
Monitor your plan and make necessary adjustments by
It is a process that everybody should follow in order to get the most out of life. Put simply, financial planning starts by working out what is most important to you in life i.e. your goals. Whether it is helping your children to buy a house or go to university; moving house yourself; planning early retirement; or setting up a business, you will need to do some financial planning if you are going to achieve your goals. By working out what the costs will be and when you will need the money, you can start to plan your finances to work out how to get where you want to be.
reviews By matching your finances to your goals you will: -
Have a much clearer view of where you are going in life
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Reduce the stress involved
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Be in control, on track and have peace of mind
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Financial Planning From The Beginning...
Contents
Here you can read topics that will help you make the most of your money throughout your life.
Financial Life Stages:
Planning for your future financial independence relies on you having a plan that is flexible and suits your needs at all times. You will notice that we have highlighted certain life stages for you to look at, these will help you analyse whether you are on the right path for your life as it currently stands, as well as being able to help you think about future life stages you are likely to encounter. There is a wealth of further information available to you which talks about the many different topics highlighted here. You can find this information on our website; www.beaconwealthmanagement.co.uk If you would like a complimentary first meeting, with one of our advisers, you can find their details on page 18 (Meet The Team) or contact the office direct:
: 01480 869466
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1) Happy Go Lucky 2) Long Term Relationship 3) Young Families 4) Wealth Accumulation 5) Financial Independence 6) Changing Priorities 7) Retired About Us Meet The Team
: info@beaconwealth.co.uk
Beacon Wealth Management Ltd voted the best independent financial advisers of the year, in the East of England 2013.
The content in this publication is for general information and use only, and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon the information without receiving appropriate professional advice through examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Mortgages are not regulated by the Financial Conduct Authority (FCA). Your home maybe repossessed if you do not keep up repayments on your mortgage. The value of your investments can go down as well as up. Beacon Wealth Management Ltd
Happy Go Lucky A happy go lucky individual could, in financial terms, be classed as someone who is single, recently finished education and on the verge of starting their new career with only a few financial commitments.
Budget Plan - It is always good to start your financial future with a budget plan and it may be the first time you have ever had to make a plan of this type. It does not have to be in depth or time consuming and you do not have to be particularly good at maths; just something quick and simple that can be completed in your spare time. This will give you a guide as to where your money is currently going and if you need to think about any further advice.
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Although seeking financial advice can be seen as something you would only do later in your life, it is actually better to start whilst there are fewer demands on your income. In this financial climate it has been very difficult for young people to obtain jobs that reflect their qualifications, which is why when times are harder it is better to have a plan, rather than wait until something better comes along, or you win the lottery! Once you have a good understanding of where your money goes, you will be able to see if your future plans are plausible and what you need to do to set your money on track.
ISA’s explained;
Even if you do not have a huge amount of money left over at the end of the month, a small amount will soon add up over time. There are a few simple saving solutions that can ensure all your spare cash is earning you more money, such as an ISA (Individual Savings Account). Also if you are/have attended university, it is wise to have a breakdown of how much you have borrowed and when you will start to pay back your debts. Although it could seem further into the future, once you meet the threshold requirements you will have to start paying back this money. It is better that you are in control before it is forced upon you.
ISAs work the same as regular savings accounts but with the added benefit of being tax free - There are limits on how much you can put into an ISA throughout the financial tax year - Almost anybody can obtain an ISA -financial A lot of also allow taxISAs year you to withdraw Almost anybody can some obtain of the money, so you an ISA locked Easyare tonot keep trackin ofto any contracts where your A lot of ISAs also allow you money is some inaccessible.* to withdraw of the -
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money so you aren’t locked in to any contracts where your money is inaccessible *terms and conditions apply from different providers
Checklist: -
Make a budget plan Set money goals in relation to your plan Research the best deals for ISAs and other savings accounts
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Long Term Relationship At this stage in life your financial commitments are growing, and you are perhaps looking to get married and/or setting up home for the first time. In this case, information about setting long term financial plans is very important to you. The first thing you will need to do for any long term goals is to set a budget of how much you want to spend, and be realistic about it, if you set your budget too low you may not fulfil your ultimate goal and be disappointed, but do not overstretch yourself either.
Joint Bank Accounts – This financial plan is slightly different as you can do it jointly, which will set out all the financial income and expenditure for the household. With this it might be a good idea to look into opening a joint bank account. The advantage of having a joint account means it is easier to pay the mortgage/rent and other joint bills; you can both also pay in the same each month to make it fair and easier to manage a budget. At this stage you can start to put stricter timescales on your plans, whereas before it may have been to simply save for a holiday or a new car. Now you will be able to see where you want to be financially in the next 3-5 years.
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Obtaining a Mortgage - Mortgages are one of the biggest financial commitments you will ever make in your financial life; this is why it is always best to gain as much information as possible before agreeing to a lengthy payment programme. To obtain a mortgage you will need a few simple items;
3 months’ salary slips 3 bank statements A good credit rating report Identity Evidence (Passport, driving licence)
There are many ways you can find different mortgages; a simple search engine will regurgitate a whole host of mortgage information from several providers. Make sure you stick to your budget plan and do consider setting up a meeting with a mortgage adviser, as they have access to many other exclusive deals. It is also worth seeing an adviser just to make sure that your information and research is correct, and your plans are achievable. Checklist: -
Set out a budget plan Check credit rating Research joint bank/savings accounts Gather some information about mortgages from several different providers/ mortgage adviser
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Young Families If you are thinking about starting a family there is one clear thing that you will need, and that is a stable financial situation. This is also a good time to renew your long term savings goals. You probably already have a mortgage and a steady career and hopefully your financial needs are catered for. However, starting a family will obviously change all of that and you will want to start thinking of their financial future as well as your own. Not only are the long term needs of a child important, so are the short term needs, before your young family develops. Make sure you have an understanding of what you will need to buy or change and how much this will cost. One of the many ways of securing your stable financial future is insurance. Types of Insurance - There are a few different types of insurance that will help if anything unexpected were to happen, which would mean your finances would not be a worry. Your need for life cover may be small, but some form of income protection is very important. (Free life insurance is available to those whose children are under 6 months old.*) Other types of insurance will pay an income if you are unable to work; most forms of health insurance will facilitate getting you back to work quickly by helping with medical expenses if you need specialist treatments. A lot of these plans include income protection and permanent health insurance.
Helpful tips when seeking insurance: -
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Get cover when you are fit and well rather than when something has happened Refer to your budget plan; know what cover you need and what you expect from it Check out what benefits (if any) are provided by an employer If you are self-employed the state will not provide any income protection – so it is essential that you cost into your budget a financial safety net otherwise your life style and career could be decimated Always make sure the insurance is catering to your exact needs, do not end up paying for added extras on cover that is not applicable to you
*At the time of going to press, see website for further details. Beacon Wealth Management Ltd
At this stage it would also be a good idea to start looking more in depth into your pension plans, if you have any. With new regulations for employers (auto enrolment - otherwise known as workplace pensions), pension schemes for many companies are now an ‘opt out’ basis, meaning you will be paying towards your retirement unless you say otherwise. However, you may need to find out how much your contributions are compared to the return you will get when the plan matures, and when it will allow you to retire. It could be beneficial for you to seek other forms of pensions or investments for retirement.
Checklist: -
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If you are planning for a child, how much will the short term needs cost (cot, pram, nursery renovation etc.) What will the long term financial cost of having a child be for you (childcare, possibly reducing working hours) Does your mortgage offer a maternity payment holiday facility?* Are you entitled to any benefits (consult government website) Do you already have insurance? If so, find out what it offers, (are there better alternatives?). If not, look into what you need Do you already have a pension plan? If so find out what it offers, are there better alternatives?
*terms and conditions apply from different providers
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Wealth Accumulation Your career is settled, you have a good income and your family is growing up. Maybe friends and acquaintances are starting to talk about what they would like to be doing when they retire – maybe the opportunity of retiring early. Of course, you can retire whenever you like, but it is more likely to be the case of whether you can afford to retire early. It is not down to the age at which your state pension pays, although it can be a big influence, it comes down to the level of income your arrangements can provide. At this point in time, your children (if you have any) may
be starting secondary school and their demands on your finances are increasing, ready to set them up in further education. Hopefully, your career is settled and you are receiving a good income and will be for the foreseeable future. It may be a good idea to start thinking about more stable investments to increase your available income for your children’s university funds etc. Usually at this stage it is a bit of a juggling act, you are still using your surplus income to pay for day-to-day living and to support your family, but you will need to start
considering what you will do when you reach retirement. Pensions may begin to creep into your mind, although by this point you should already have some sort of plan in place for when you retire. Throughout life these plans may have changed, which is why you should always update your budget plan when new experiences come along. It is now very important as you begin to reach retirement age that you have everything in place whilst you are still earning a full income, any shortfalls in your plan can be fixed and changed at this time.
Checklist: -
Analyse whether your day-to-day costs are affecting your financial plans Look at how much of these costs are changing your savings for retirement Make sure you have enough saved for any unexpected circumstances See if your retirement plan is the same as when you started it, if not, take another look at it and see what needs to be amended Beacon Wealth Management Ltd
Financial Independence You are probably at the peak of your career, your children (if you have any) are young adults, and they are becoming financially independent. Financial Independence for you can be defined differently, but we will say it is when you have enough money from other sources, that you do not have to work for pay. You only work if/because you want to, not because you have to. Now, you may not want to achieve full financial independence, or may not be able to achieve it any time soon (because your “enough� is too large compared to your income), but you can still achieve partial financial independence. How do you become financially independent? There are three stages; financial security, financial freedom and financial independence.
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Financial Security – knowing you have enough to live on for life, or having a good job/pension/income that affords you a good standard of living. However, thought needs to be given if you/one of you was to lose your job/income. Income protection and critical illness cost very little, but could be a lifeline to you and/or your family should something happen.
Financial Freedom – sitting in between security and independence many believe they are financially free, and get accustomed to a certain way of life, but this can disappear if the money runs out, due to any particular circumstance. For this reason it is important to take stock of what you spend and try to keep some savings aside, along with your required protection.
Financial Independence – This is where you get your money to work for you, rather than you working for your money. Regardless of how the economy changes you are able to sustain yourself by having multiple streams of passive incomes, and you know that if all goes wrong tomorrow, you can create your wealth again. Essentially, it is a state of mind rather than a state of being.
Checklist: -
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Regular financial health checks Assessing and dealing with any debts Manage your monthly budget Ensuring you/your family’s required protection is in place Review your savings. Are they working hard enough for you? If you have children, are they going to university/buying a house/in need of some financial help? If so was this pre-planned, with money set aside? If not you will need to access your finances to see if you are able to help. If you had set aside money which is no longer required (when you anticipated), do you have a plan? It is probably wise not to tie it all up in case it is required at a later date. Review your pension, are you still on track to retire when you had planned, or do you want/need to retire sooner/later? Check that your pension is able to cope with any change in plan, and whether it needs to be adjusted to reflect any change in your attitude to risk.
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Changing Priorities If you have children they have probably left home and you may be considering downsizing. You may also be thinking about a new lifestyle, with new interests/hobbies/travel and potentially retirement or working part-time. Although the road to retirement can generally be thought of as a marathon, for the over-50 crowd the last decade or two can seem more like a sprint, but that is not necessarily a bad thing. People in their 50s are often at the highest capacity of their lives in terms of savings ability, because most are at the peak of their careers – and salary – and have a home that is either paid off or close to it.
Children may have also moved out, hopefully reducing your household costs, and contributions to education may have stopped. Whilst it is not possible for all children to move out when both you and they had hoped, due to whatever circumstances, this is the time to really accumulate your retirement nest egg, in the final stretch of your career. If you are within a decade or two of retirement, you have probably built up a significant amount of value in your pensions, and could reap large up-front savings by making tax-deductible contributions. It is also worth making sure that you have used up all of the allowance in your tax-free savings accounts.
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Discuss your retirement plans
Retirement Planning
Having an honest conversation with your partner about your ideal retirement age and expectations for your ‘golden years’ helps when making sure you are on the right financial track, as it could affect the required income. If projections are not matching up with expectations, a new plan is needed.
Make a firm decision about when you would like to stop work/sell your business. Remember, income will dramatically drop and it is unlikely your pension will make up the entire shortfall, especially if you are relying on your state pension.
Sometimes this involves saving more money, staying in the workplace longer, or even getting ready to find a parttime job during retirement.
Map out your remaining working years looking at how much has been saved, and how much needs to be put away to cover retirement needs. Remember, being retired is a bit like being on holiday – all the time! When you are at work it is difficult to shop, but when you are on holiday you often spend more, whether that is because you are eating out more often or visiting more places. You should take advantage of these golden years, but in order to do this you need to create a realistic plan of what you will require - when you retire you will not have the option of working overtime.
Checklist: -
Assess whether your retirement is still on the correct course, if not address any changes required Make sure your investments are set at the right risk threshold Make sure you will not be penalised too heavily or at all when trying to access money during retirement Ensure your protection is up to date, a sudden unexpected change now could largely hinder your future plans
Take a serious look at your retirement plans Ideally you start planning for your retirement at an early age, and reassess it at regular intervals to make sure your plan still fits in with your current and expected needs/desires. The longer you wait, the less time you have to fix any potential problems. Your plans MUST reflect potential changes, such as losing a job or a sudden illness, to ensure you do not get caught out unexpectedly. Many pensions are now placed in managed investment portfolios to try and help increase quicker growth, however these portfolios are often allocated on your attitude to risk and as you get closer to retirement, the risk you are willing to take is often largely reduced. Your portfolio/s should be assessed in light of this. If you are a couple and there is a large difference between what you both earn, there could be a way to reduce the amount of tax you both pay, by increasing the amount of savings. Another option to raise money in retirement is by downsizing to a smaller house. When children have moved out many couples seek to find a home that is more suitable to their own needs, which can often free up some extra money for living expenses.
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Retired You are living your golden years. Your lifestyle is likely to have changed and it is vital, now more than ever to consider long term care costs and inheritance tax. People are living longer, and often much more active lives in retirement. With more to do than ever before, having the money to fulfill your dreams is particularly important, whilst still making sure you are able
to meet your ongoing financial commitments for the rest of your life - you do not want to risk running out of money. Fortunately, the need for financial protection reduces, because pension and investment income is not dependant on your ability to work. You may need to consider, however, how a surviving partner would manage in the event of income reducing, due to the other dying – not a pleasant thought, but likely to happen. It is important you have these plans in place.
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Checklist: -
Work out how much income you need - a detailed summary about how much you need now and in the years ahead allows you to work out what you need to live.
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Check your pension arrangements - Find out the details about your pension, check your tax and national insurance at the same time.
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Review your savings - Consider the degree of risk you are happy to take and the level of income you will need to generate.
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Do not forget about inflation - The rising cost of living is a particular problem for those on fixed incomes and those in retirement, and it can easily affect your long term plans. Check rates of escalation for your pensions, and if you are relying on income from savings, remember that inflation erodes the value of your capital.
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Think about long term care costs - Hopefully you will not need it, but long term care can be expensive and a nasty shock to your finances if you are unprepared.
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Tied-up Capital - Equity release (releasing money from your home) has become more popular but it is a big step, so do a full investigation to make sure it is what you need.
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Looking after your assets - Worried about what happens to your assets after your death? Make sure you have a Will, and if you have assets valued at more than ÂŁ325,000* (single person) or ÂŁ650,000* (married couple) then find out about inheritance tax and what you can do to minimise it.
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Make sure you are using your pensions to your benefit by making use of any tax free cash.
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Note: Income from pensions (including your State Pension) is taxable.
*correct figures on date of release Beacon Wealth Management Ltd
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About Us Our Ethical Policy We (Beacon Wealth Management Ltd) are committed to providing the highest standard of financial advice and service possible. The interest of our clients is paramount, and to achieve this we have designed our systems and procedures to place you at the heart of our business. In doing so, we will:
Be open, honest and transparent in the way we deal with you;
Not place our interests above yours;
Communicate clearly, promptly and without jargon;
Seek your views and perception of our dealings with you to ensure it meets your expectations or to
identify any improvements required.
Independent Advice We will advise you and make a recommendation for you after we have assessed your needs. Our recommendations will be based on a comprehensive and fair analysis of the market. We will place no restrictions on the investment markets we will consider before providing our investment recommendations, unless you instruct us otherwise. Above all we will only make a recommendation when we know it is suitable for you.
how we can support you in Our Investment Services and Costs We provide you with an initial consultation, free of charge. This helps us to understand your financial objectives and will confirm working towards these. We will also discuss the cost and levels of our services, both initially and throughout our relationship with you. We charge our services by way of a fee. These fees are based on a percentage of the amount you invest and/or a fixed fee/hourly rate for financial review and product implementation. We will never charge you until we have agreed how we are to be paid.
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Meet The Team Tony Larkins APFS Chartered & Certified Financial Planner. (Managing Director) Specialising in personal and corporate financial planning as well as Pensions and Investments tlarkins@beaconwealth.co.uk
Adrian Banks Dip.PFS SOLLA & Independent Financial Adviser
Chris Wills Dip.CII Independent Financial Adviser ..
Specialising in long term care and financial planning
Specialising in financial planning ..
abanks@beaconwealth.co.uk
cwills@beaconwealth.co.uk
Martin Eaton BSc, CEFA, CeMAP Independent Mortgage and General Insurance Adviser
Mark Graddage Cert PFS, Cert CII (MP) Business Support Manager
Specialising in mortgage, protection and general insurance
Specialising in mortgage, protection and general insurance
meaton@beaconwealth.co.uk
mgraddage@beaconwealth.co.uk
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Beacon Wealth Management Ltd Chartered Financial Planners The Old Chapel Thrapston Road Kimbolton Cambridgeshire PE28 0HW T: 01480 869466 F: 01480 869477 info@beaconwealth.co.uk www.beaconwealthmanagement.co.uk
Authorised and Regulated by Financial Conduct Authority. Registered in England and Wales No. 526604