Is 2022 to be the year when you ‘eat the frog’?
The saying refers to a task you really should be taking on, but instead have been putting off – after Mark Twain’s famous quote:
“Eat a live frog first thing in the morning and nothing worse will happen to you for the rest of the day.”
This can also apply to the task of getting to work putting our finances in order for 2022 and beyond. If we eat the frog on this right now, we can relax for the rest of the year, knowing that we’ve put everything in place.
Here’s what we recommend as the main areas to be addressed.
Check your networth
Now is a great time to take a look at what you’re worth financially so you have a clear idea of where you are in terms of reaching your financial goals.
One way of doing this is by logging onto your Wealth Platform and taking a look at your assets and liabilities.
You can add details about your assets such as your property value, savings in bank accounts etc and update them at any time, for example, if the value of your property goes up.
You can also add your liabilities, such as outstanding mortgage and other debts.
From this our software will calculate your current net worth, as well as track it if things change.
For a client with assets of £916,563 and liabilities of £305,000, for instance, their total worth is £611,563.
Pay down debts
In any sensible debt reduction plan, credit card debt should be attacked first.
Mortgage debts are another area to consider, especially now that inflation is at 5.1% and expected to remain relatively high this year, and that changes in interest rates are also anticipated.
We’ll review your mortgage situation and advise you on whether your rate is likely to rise or stay put at your next review.
Update your risk profile
The general rule is that low risk investments bring lower returns, higher risk investments offer the potential for higher returns. But our ‘appetite’ for risk might change throughout our lives.
There are those, generally younger, investors who might opt for higher risk as their investments have time to take in highs and lows. While later in life, as retirement approaches, many people prefer to switch to the low risk, safer end of the scale.
We ask you about your risk profiles at your review in order to keep them up-to-date, but the great thing is that you can use your Wealth Platform to ‘try out’ various scenarios, to see how any potential changes may affect you.
Check your insurance policies
Insurance plans are often left in a drawer of our desk and forgotten about, but we recommend dusting them off and reviewing them at regular intervals.
Are you sure you’re not under or over-insured? If, for instance, your family has grown bigger, you may wish to increase the amount you’re covered for.
Time to make a Will?
We constantly urge our clients to make a Will and ensure, each year, that it is up-to-date. Your loved ones also need to know where they can find your Will in the event of your passing.
Use up those tax allowances
This year’s standard Annual Allowance for how much you can contribute into a defined contribution pension is £40,000 (if you put in more you may be taxed). The Isa tax allowance is £20,000. The Capital Gains Tax allowance when you are disposing of an asset is £12,300. These allowances expire on April 5 and, as they say in the supermarket business’when it’s gone, it’s gone’. We can help you to meet the deadline.
Don’t forget the 50-20-30 rule
The 50-20-30 rule divides your monthly income into three categories: 50% for the essentials, such as mortgage payments and bills, 20% for savings, and 30% for everything else, including luxuries and socialising.
As well as keeping you saving, the best part of the 50-20-30 rule is that you get to spend more than you save!
Check in with your goals
The holiday period may have given you time to pause and look forward to retirement. Why not take a bit of time to make sure those goals are up-to-date? Imagine what you really want to get out of life – what’s on your ‘bucket list’?
John Cleese was interviewed lately and said there is only one wish on his list: he never want to be cold again! Perhaps buying a villa in Portugal, to escape those cold, dark and wet British winters, might be your dream.
In your mind’s eye, paint a picture of your ideal retirement, and then come talk to us. We’ll see if, together, we can make it happen.