You are here: Home - Investing - Getting Started - News -

The Five Days of Financial Planning

0
Written by:
24/11/2014
As Financial Planning Week kicks off Adrian Lowcock, head of investing at AXA Wealth, has a five-day gameplan to get your personal finances back on track in time for Christmas.

Day One – Write a budget

The aim of a budget is to know exactly where your money is going – how much is being spent on energy bills, mobile phones, the rent or mortgage and how much you have left over after all the necessities have been dealt with.

This is the best place to start as until you know what you are spending you cannot make any other plans. The best way to approach writing a budget is to treat it as a financial confession: This is your chance to admit to yourself exactly how much you spend on going out, shopping and those occasional treats.

Making a spreadsheet may be the best way to keep a record of your spending as this allows you to add missed items easily and move them around into similar categories. Once you have done the spreadsheet that is your work done for the first day.

Day Two – Make a list of your objectives

This list can be as long, or as short as you like. It can include things you want to do in the short-term: Weekend breaks away or something you want to save up for to buy, to longer-term goals such as saving for retirement or a deposit for a home. Once you have a list together go back over the list and put a timescale on each item and a cost, how much do you think that you want to spend on your weekend break or how much income do you need to retire on. The closer to retirement you are the better idea you will have on this.

Day Three – Are your goals realistic?

Time to go back to your budget and review it. How much money do you have left over each month? Are you saving enough and are you able to afford to do the things you want to do? Even if you can afford everything you want to do, your budget is likely to show some areas where you spend much more than you thought. Take a little time identifying areas where you could possibly save money, either through negotiating better rates or through changing your habits.

It is important to be realistic with any changes you make to your spending habits. It is much easier to switch mobile phone or electricity providers than it is sacrificing that Latte in the morning. Get a list of all your providers and make a note of when your insurance renewals become due or contract expires for your mobile phones or broadband.

Day Four – Cutting costs

This day you can spend going through each provider, browsing online looking for the best deals and changing your contracts to reduce your bills. Take your time working through through each bill, doing as much research as you can. Take advantage of comparison websites to find the best deal for you. When you have found a new provider, don’t stop there – actually follow through with the transfer. Make a note of how much you expect to save and store the details of the contract you have found.

Once you have worked through each contract and provider, add up how much savings you are likely to make and check it against your budget. If you have saved enough to meet your goals great, if not you might need to revisit some of the contracts. For example can you cut further costs on your mobile phone package or TV bundle.

Day Five – Tax efficient saving

Now you have cut costs and found money to save you have to decide what to do with it. There are two main savings products you can use: NISAs and pensions.

NISA investors and savers can put up to £15,000 each year into a NISA and the money, whether invested or held in cash, will grow free of any additional tax. You don’t even need to declare them on your tax return. The advantage of a NISA is if you need the money you can access it right away. However, if you are investing in stocks and shares you may well get back less than you invested. 

The most popular pension now is the SIPP – Self Invested Personal Pension. This allows you to save for your retirement and offers attractive tax relief for doing so. Any money placed into a pension benefits from income tax relief at the contributor’s marginal rate. Basic income tax is reclaimed by the pension administrators and gives a boost to your contribution, for example a contribution (net of tax) of £8,000 by a basic rate tax payer would be grossed up to £10,000 by the Inland Revenue.

However, by investing in a pension you are not able to access the money until you are 55 so pensions should only be considered once you have sufficient savings to protect you in an emergency.

Adrian Lowcock is head of investing at AXA Wealth.

Tag Box

Debt

Pension

Spending

Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
Govt must protect retirees from ‘rip off’ drawdown charges – Labour

Labour has urged the government to ensure none of the 320,000 savers expected to take advantage of pension freedoms are...

Close