Owning investments might feel secure, but without a robust financial plan, they run the risk of becoming little more than a collection of assets – impressive on paper, but directionless in practice.
In your working life, you may have built a combination of workplace pensions, Stocks & Shares ISAs, property investments and various savings accounts. But without clear objectives, they can result in a complex web of unnecessary risks, duplicated exposures and significant tax inefficiencies.
Questions to consider
Start by asking yourself these three questions:
• How many investments do I own?
• How do they complement each other?
• What’s the overarching goal?
Tip: If you’re struggling to answer any of the above questions, it’s a perfect time to zoom out and create a robust financial plan.
Common financial planning mistakes
Without a plan for your investments, you may withdraw money from a taxable pension before using ISA savings, pushing yourself into a higher tax band unnecessarily. Or you might take your pension tax-free cash earlier than you need to, leaving it sitting in a low-interest bank account while inflation gradually erodes its purchasing power.
What makes a financial plan different?
A financial plan starts not with your assets, but with your life goals. That involves considering questions such as, what age do I want to retire? How much do I want to gift to my children? What legacy do I want to leave behind for my loved ones?
Cash flow planning
The next step is to develop a cash flow plan – a holistic understanding of your assets and a forecast for how wealth can be used over time. By sitting with a Financial Consultant, you quickly develop a visual understanding of when to begin drawing an income, how much can be withdrawn sustainably and whether gifting may be appropriate.
The hidden risks
By simply collecting investments, it’s likely that you hold overlapping assets or are paying excessive fees that are eroding your returns. Without a cash flow plan, people often withdraw money from the wrong accounts, pay unnecessary tax, or become overly cautious spenders. It’s therefore clarity that aids optimal outcomes.
[i] Take the first step with a free, no-obli-gation meeting to explore how cash flow planning can help. Speak to an expert for tailored guidance and a robust plan by calling 0330 564 446 or get in touch via our contact form.
This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
