What is the best way to make long-term financial plans?
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My wife and I are both in our forties and enjoy a good income. I work in the public sector and am a higher rate taxpayer, while my wife is a self-employed HR consultant and runs an Airbnb adjoining our home which has been very successful, even during the pandemic as we’ve accommodated key workers. My wife has a number of pensions from the past but doesn’t pay into one at the moment. We also have some savings in ISAs. I’m not sure that what we have is right for what we want to achieve in the longer term. For example, our children will hopefully be going to university soon. Can you help?
Douglas Bridges of Smith & Pinching responds:
It certainly sounds like both of you would benefit from a full assessment and analysis of your financial affairs so that you can put plans in place to meet your needs at critical times of your life, such as when the children go to university and when you retire.
In addition, it’s important to ensure that your existing pensions, savings and investments are right for you. This means making sure not just that they are appropriate in terms of their performance but also that they are suitable in terms of the level of risk you are taking.
Part of the overall assessment would be a review of your wife’s old pensions to establish the need to continue to save in a pension for her retirement. Pensions are a tax-efficient way of saving, in that you get tax relief on any contributions you make, enhancing their value.
I strongly recommend that you talk to an independent financial adviser and put together a clear financial plan. We use a tool called Lifetime Cashflow Planning to allow you to see the impact of changes you make on your overall finances, such as additional pension contributions. It’s a really useful tool to back up your planning, so that you can see the potential value of your savings, investments and pensions at various milestone points.
A financial plan should be reviewed regularly to make sure it’s on track and that it continues to be suitable for your circumstances as they change, so engaging a financial adviser on a long-term basis can be both helpful and reassuring.
Any opinions expressed in this article do not constitute advice. The value of your investment can go down as well as up and you may get back less than the amount invested.
For more information, please visit www.smith-pinching.co.uk
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