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The 12 days of Christmas

On the first day of Christmas, would you like a partridge in a pear tree? Possibly. How about five gold rings on the fifth? Where do we sign?! I know, instead of 12 drummers drumming, how about 12 ways to shore up your finances for the future? Okay, so tell me!


Well... on the first day of Christmas my financial adviser said to me…

1. Budget

It’s a golden rule; spending less than you earn is the key to long-term financial suitability. When you’re starting out or moving up in your career and you probably haven’t reached your maximum earning potential, it’s surprisingly easy to spend no matter what you earn, so get into the good habit of budgeting from the outset.


2. Save for a rainy day

You’ve taken control of your spending, now it’s time to build up an emergency fund. The equivalent of three to six months’ worth expenditure is a good rule of thumb, to pay for short-term financial hiccups like being off sick for an extended time or a large unforeseen bill.

3. Compounding is king

The sooner you start saving the better. Compounding basically means you effectively earn interest or investment gains on past interest and gains. Over time, this quickly adds up to make a big difference. For example; if you invested £100 p.m. from age 30, by age 60 (with £36,000 paid in total) after compounding gains, with a 3% return you would have a £58,419 investment. With 5% annual returns it would be an impressive £83,573.


4. Use your ISA allowance

The Individual Savings Accounts (ISA) allowance is currently £20,000 p.a. in 2020/2021 and should always be used if possible. You are able to withdraw ISA funds at any time, and there is no Capital Gains  Tax to pay on any returns.


5. Plan your borrowing

Debt of some kind is inevitable in life, especially when you purchase property. Nurturing your credit rating is important to ensure you get the best interest rate and terms available. Any short-term debt you have such as credit cards and overdrafts should be paid off as a priority, as they usually attract the highest interest rates. However, using a credit card for usual living expenses and paying off the full balance monthly (therefore attracting no interest or charges) is a good way to build your credit rating.


6. Think about overpaying your mortgage

You’ve worked on your credit rating so you can secure good rates and terms on your borrowing, but did you know that for some, overpaying your mortgage could be highly beneficial, especially with how low current savings rates are. By increasing your monthly payments, even by a small amount, you could not only reduce the time period that it takes to repay your mortgage substantially but also save on the interest, meaning you make the same gain as saving at your mortgage rate.

7. Get protected

You’ve got some valuable assets now, it’s time to protect them in case the worst happens. Building and contents insurance for your property are usually a given, but you should also consider income protection and life cover to ensure financial support for you and your loved ones should you be unable to work for an extended period of time or pass away.


8. Make the most of pensions

The sooner you start retirement planning the more comfortable you could be later in life. Remember compounding; it will make a significant difference. It’s also wise to make use of employer contributions, it’s essentially free money! Also, consider what you’d like your retirement to look like and how long your savings will need to support you; understanding these key points will enable you to plan appropriately.


9. Plan for big spending

You might want to get married, have children or go on a world tour for your 40th. Big spending needs to be planned for in advance where possible! For the unexpected big spends, tools like cashflow modelling can help you understand the potential impact on your income, expenditure and overall wealth with a graphic representation.


10. Regularly review your plan

Effectively we’ve been building you a financial plan step by step. This is not a static plan, your circumstances, aspirations and other external influences are very likely to change over time. Your financial plan needs to reflect those changes, so we’d recommend you review your plan at least annually.


11. Think about retirement

Retiring isn’t as simple as it used to be, you no longer hang up your tie on your 65th birthday and head towards the golf course when your State Pension used to kick in. The default option used to be purchasing an Annuity. Pension Freedoms now means you can flexibly spend your pension savings however you like after age 55. More people are also working longer to supplement this flexible income, either part-time or in consultancy roles. Therefore, determining exactly when you want to retire can be difficult. Cashflow planning can help you make the ultimate decision, sometimes meaning you can retire sooner than you anticipated.

12. Leaving a legacy

You might feel a little young to be planning for the end of your life and potential Inheritance Tax (IHT) liabilities, but as a minimum, having a valid and up-to-date will is a very wise move. Your assets will be distributed to who you want and it’s a good start for reducing a potential IHT bill. Remember, IHT is a complex, but completely avoidable tax with the right planning.


So, there you have it; twelve (not especially festive but valuable) tips for securing your financial future!

There is, of course, professional help available for all these matters. If you’d like to talk about any of the topics mentioned, don’t hesitate to get in touch. 

We wish you all a very Merry Christmas, and a Happy New Year!


The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.


As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.


The suggestions in this document are for information only and should not be construed as advice. The compounding information is for illustrative purposes only and does not represent any actual returns. You should seek independent advice before taking action in respect of your pensions and always check with your lender first that there are no penalties if you intend to make overpayments to your mortgage.