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Five financial planning questions, answered by experts

There are common aspects of our finances that we all should check are in order. Expert financial planners, Rachel Cornwell and Simon Davis, answer some of the most common queries they receive from clients.

| 7 min read

While many of us know the importance of being in control of our finances, we are not always sure what this means or how to go about it. There are some things you should think about that form the basis of a strong financial position, both now and into the future.

1. Are my finances in a good shape?

Gathering information about all your bank accounts, savings, mortgages, pension pots and investments is a good place to start to fully understand your financial situation. It may immediately raise some questions as to whether your finances are being managed as effectively as possible.

Ask the expert: Rachel Cornwell, Financial Planner, Birmingham

“Day-to-day spending is something I typically find my clients routinely overlook. Most clients focus on their income because this is a clearly demonstrable quantity: it’s your salary, pension and/or state pension. But getting a handle on where it goes is something clients find hard to figure out. Most clients know whether they do or do not live within their means, but they can’t provide a breakdown of where and what they spend their money on.

To spring clean your finances, take the time to sit down and analyse your monthly outgoings. Calculating your essential spending is particularly important if you are still employed and are worried about what would happen if you lost your job or you couldn’t work for a prolonged period of time.

Understanding how much of your income is spent on things that you possibly don’t need or could cut back on allows you to consider refocusing your spending to set some saving goals.”

2. Is my debt under control?

The main foundation of a healthy financial position is keeping debt under control. For many, the ideal situation is having no debt at all. However, debt is often a necessity as, in most cases, you are unlikely to buy a house without it, and younger generations are unlikely to be able to pay for higher education.

Ask the expert: Simon Davis, Director of Financial Planning, London

"When getting your house in order, the one thing everyone should do is cut credit card debt immediately. The compound interest paid on credit cards is never going to be matched by returns on savings and investments and is generally considered “bad” debt. Freeing yourself from ever-spiralling charges should be a priority for anyone who worries about their financial situation, and everyone in general."

3. How can I prepare my finances for a loss of income?

Nobody likes to think about death, serious illness, or losing their job, but being prepared for the unexpected is vital if you want to protect yourself and your loved ones if the unfortunate occurs. The simplest way to prepare is to always have an emergency cash reserve. If you’ve carried out the exercise above you should know how much income you spend on life’s essentials. It’s helpful to set aside approximately three to six months of expenses to cover you if you lose your income unexpectedly.

Ask the expert: Simon Davis, Director of Financial Planning, London

"Income protection can offer solace that your family will still be able to maintain its lifestyle in the event of critical or chronic illness. If you are employed, this is likely to be offered by your company as part of your benefits package but there could be limits on the amount paid out and almost certainly on the length of time the policy will support you.

Life cover for your spouse is also something often overlooked but can give you comfort that if your spouse dies you can have the mortgage, bills, childcare etc. taken care of if they died within the policy term."

4. Should I start writing a Will?

It is important to ensure all your paperwork is in order and that you have spoken to your loved ones about your wishes to avoid any surprises.

Ask the expert: Rachel Cornwell, Financial Planner, Birmingham

"It’s understandable to have a reluctance to think about future declining health and death. These are not the cheeriest of subjects. It also costs money to put a Will in place, so people often put it off until a later date, or until a life event such as the death of a parent spurs them into action. I urge all clients to write a Will so their wishes are known. At the very least this also decreases the burden on grieving loved ones as it makes the administration of the estate easier.

Make sure you have your wishes documented legally with both a Lasting Power of Attorney (LPA) and a Will. Without either there is a risk of the state deciding who takes control of your assets and interests. And without a will it will decide who your estate goes to and in which proportions regardless of what you might want to happen. When writing a Will or an LPA I recommend clients consider appointing one or more people they trust as executors. People they feel safe making decisions on their behalf in the event they are no longer able to.

Make sure you have your wishes documented legally with both a Lasting Power of Attorney (LPA) and a Will. Without either there is a risk of the state deciding who takes control of your assets and interests. And without a will it will decide who your estate goes to and in which proportions regardless of what you might want to happen."

5. How can I protect against financial fraud?

It is crucial to protect your online finances. Starting with your email account, create unique, strong passwords such as combining three random words. Consider using a password manager, which can create strong passwords and securely store them for you. And starting with your email and online financial accounts, set up two-factor authentication, which restricts access by also using your mobile phone.

Ask the expert: John Harrison, Head of Information and Cyber Security

"Regularly check your online financial accounts to spot unusual activity and subscribe to a free credit checking service, which might indicate if someone is trying to use your identity and is applying for credit in your name.

Move to a ‘zero trust’ mindset, which means assuming every email, message or phone call is bogus until you can independently prove it is genuine. Always ask yourself, “Is this contact unexpected and is it asking me to do something?” If the answer to both questions is yes, it could be a fraud attempt. Resist responding, even if the matter appears urgent, and check with a friend or family member, or call the supposed organisation’s main office number. You can find more helpful tips on our guide to keeping safe online. "

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

Has something happened in your life?

When there is a change in your life, such as retiring, inheriting money or planning for later-life care, it can be valuable to speak to a Financial Professional to protect your wealth.

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