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2 October 2020

Five steps to Zen peace around your finances. Step Five: Review annually

This is the final blog in the series of five by Carbon’s Director Glasgow Richard Wadsworth.

You know your overall position, you’ve tamed your impulse buying, you know what your different pots of money are for and have simplified and tailored these pots to your needs, so you’re done! Not quite, as, of course, everything changes, from tax rules to investments to (most importantly) your outlook and plans for the future, so it’s crucial that you revisit this exercise at least once a year.

The annual review should cover the first four steps again (Step 1: Understand your current financial position, Step 2: Choose where to spend your money, Step 3: Be clear on the purpose of each ‘pot’, Step 4: Review your specific ‘money pots’) with perhaps more focus on two points:

  1. What has changed in your life and what are you planning for the future? Tweak your affairs accordingly to align with these changes.
  2. How could your finances be improved by taking advantage of annual tax ‘staples’ such as ISA subscriptions or pension contributions, or by moving investments to more efficient funds?

But don’t overlook the more mundane steps. As an example, part of the review is being disciplined to look at your bank statements regularly. Simple steps such as this can help you check if your assumptions about spending are accurate and if you’re on track with how you want to spend your money. It also ensures you’re not paying for things you shouldn’t be (such as paying a rogue mobile phone bill for several months simply because you were too busy to check your statements – yes that was me, and it took weeks and weeks to sort out).

If you follow steps one to four, you will have a system of some sort in place. A spreadsheet to record the information helps make the review process relatively simple. And, if you are comfortable keeping up to date with changes in personal finances, you can make use of the different tax allowances and similar.

If you need help, a good financial planner can, at the very least, keep you accountable and ensure you follow through on the various steps. When it comes to step three, being clear on the purpose for your various pots, having someone objective, who knows the difficult questions to ask, and who can challenge your thinking, can be very valuable. And in steps four and five the planner can really bring his or her expertise and experience to benefit you, particularly if your affairs are more complex.

But you don’t necessarily need a financial planner and, if you follow these simple steps, you will be well on your way to gaining a sense of control over your money today. You will also be well on your way to building a plan for funding for your future life. And there you have it: two key ingredients for Zen peace around your finances.

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Richard Wadsworth is a Director at Carbon and can be contacted at richard.wadsworth@carbonfinancial.co.uk

The value of investments and the income derived from them can fall as well as rise. You may not get back what you invest.

This communication is for general information only and is not intended to be individual advice. It represents our understanding of law and HM Revenue & Customs practice. You are recommended to seek competent professional advice before taking any action.

Tax and Estate Planning Services are not regulated by the Financial Conduct Authority.

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