Why You Should Regularly Review Your Finances

Tuesday 2 July, 2024

Maintaining your financial plan is crucial for its effectiveness. Simply having one is not enough.

"Regularly reviewing your financial plans is crucial to ensure you stay on track with your goals and adapt to life’s changes," says Richard Porter, Lonsdale’s Independent Financial Adviser in St Albans. 

"Financial planning isn't a one-time event but a continuous process that helps you make the most of your money and achieve your aspirations."

Priorities and aspirations change based on the stage of life you are entering, and so too can your financial situation. Aspirations you had five years ago may have completely changed, and not revisiting your financial plans could lead to ill-informed decisions in the future. A long-term approach is needed to ensure you can support your goals and get the most out of your money. 

The following points illustrate why it’s important to keep revising your financial plan.

Your aspirations may change

It's important to review your finances as aspirations and goals typically change throughout life. For example, as you progress in your career, you may decide that retiring a few years earlier than originally planned is more aligned with your goals. 

Your finances are instrumental to what is achievable, and so when aspirations change, so should your financial plan to ensure your new goals are attainable. Adjusting how assets are accessed and organised may be necessary to reflect your new goals. 

You should reflect on big life changes

As you reach inevitable milestones throughout your life, changes are bound to follow, and whether they are planned or unexpected, reviewing your finances enables you to factor these into your longer-term plans.

For example, expanding your family and having children can drastically change your financial needs and aspirations, or receiving an inheritance may mean you could retire earlier than planned. It is always wise to review and adjust your financial plans if any life events alter your financial priorities or life goals.

It’s important to stay on track with your long-term goals

When you first start making financial plans, you have long-term goals in mind, some even decades away. However, throughout everyday life, these plans won't necessarily cross your mind. Although you may not be thinking about them in day-to-day decisions, these choices can impact your longer-term goals.

Reviewing your finances can ensure that you're still on course to achieve them. You may be closer to your targets than you expected and able to create new ones, or you may find you're falling behind. The sooner you recognise this, the easier it will be to take steps to get back on track.

You should be reassessing what risks you are taking

Risk can provide opportunities to expand your wealth but can also cause losses. For example, investments can help you grow your money but they can also decrease in value, leaving you worse off.

Depending on what life stage you are entering, you may have a different attitude towards risk. You may be more inclined to take risks when you're younger, as you are in a better position to do so. This inclination may decrease as you get older and start to raise a family and seek a stable life. However, once you gain financial security, you may then lean towards taking more risks again.

Many people tend to decrease the amount of risk they take as they reach retirement age. However, due to increased longevity, more pensioners are retaining higher levels of risk. Therefore, it is important to review how much risk your assets are exposed to and whether your attitude towards risk has changed.

Cash flow modelling will need to be updated at some point

Cash flow modelling is a great tool that provides a roadmap illustrating how likely you are to achieve your objectives and what planning may be required to do so. However, it is only as good as the data you provide and must be regularly updated to depict an accurate outlook of your financial position.

When considering lifestyle changes or financial plans in the future, cash flow modelling can help to give a visual representation of your finances and how your income and assets can be affected by these decisions. Reviewing and updating your cash flow modelling with your income and expenditure details can help show you how realistic your goals are and give you the confidence to proceed with them.

You should reflect on legislation changes

The government constantly updates legislation that affects personal finances. If you do not review your financial plan regularly, it may not be as accurate or useful as it once was.

For example, the Pension Freedoms Act introduced in 2015 allowed more flexibility when accessing your pension pot. Previously, people had restricted access to their pensions, meaning they might not have been able to access their retirement income in the most efficient way. Additionally, the Individual Savings Account (ISA) limit increased to £20,000 in 2016, allowing more tax-free savings. In the March 2021 Budget, then-Chancellor Rishi Sunak announced that the Personal Tax Allowance would increase in 2021/22 as normal in line with inflation and would be “frozen” thereafter until 2025/26.

Financial plans should therefore be revisited and updated, taking legislative changes into account to ensure you're making the most of your assets.

Reviewing your finances can give you peace of mind

Richard Porter, financial adviser in St Albans said:

“Finances can be a huge cause of worry and stress. Therefore, regular financial planning is a great way to alleviate some of this stress. The roadmap that financial planning provides can help you keep on top of your progress and put steps in place to either keep you on track with your goals, or find new ones if you've surpassed your previous ones. It can also give you the confidence to proceed with new plans.”

Even when the unexpected happens, revising your financial plans can ensure you are on the right path. From helping to provide for your family to ensuring you have a stable income during retirement, it can be of great help and give you peace of mind. 

Our financial advisers recommend that financial plans are revisited at least annually and especially after significant life events or changes. This will help you stay on track, reach your goals and aspirations, and give you peace of mind.

Please contact us to understand your financial position and what it means for your aspirations and goals.

Complete our booking form on this page or contact your local Lonsdale Wealth Management financial adviser in WimbledonBarnetLeeds / BradfordStaffordWareChippenhamRingwoodHarpenden, St Albans.”

Please note: The value of your investment can fall as well as rise and is not guaranteed. The Financial Conduct Authority does not regulate Cashflow Modelling, Tax and Estate Planning. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

A pension is a long-term investment. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

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