Seven things to consider when creating a financial plan

Annie Shaw / 21 May 2014

Financial planning is something that people often don’t get round to. They say they can’t afford the time or the cost of taking professional advice, and often it’s more tempting to retreat back under the duvet than think about life insurance and investment returns. It is, however, worth giving some thought to whether you can afford NOT to make some financial plans.



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According to Institute of Financial Planning research, 38% of people worry about money most or all of the time, and yet only 4% of those polled have a comprehensive financial plan in place.

So, here are the top seven things you need to consider to get your financial house in order:

1. Make a Will

Everyone should make a Will, however rich or poor they are. Yet research suggests that as many as three in five people in the UK have no Will, meaning that their assets, including money, their home and their personal possessions, may not end up where they ought to go when they die. 

If you don’t make a Will you will be classed as “intestate”, and when you die strict rules will kick in about who gets what. Your partner, if you are unmarried, could get nothing, as could the children of a first marriage if you have married again and not made a new Will. 

In the worst case, if you have no relatives who could benefit under intestacy rules, your estate would be declared “bona vacantia” and all your assets could pass to the Crown.

What happens if I die without making a Will?

2. Plan for your retirement

How you plan will depend on your age and the stage of life you are at. 

In the run-up to retirement, you may need to maximise your savings within a pension plan or outside one, you could be at the stage when you need to take income from your plan, or you may already be drawing an income and need to make sure that your savings will last and allow you to maintain your lifestyle.

Don’t cross your fingers and hope things will work out. There are many solutions if your investments are falling short of what you need for a comfortable retirement, as long as you avail yourself of them in time.

How much money will you need in retirement?

3. Protect your loved ones

Make sure you have appropriate insurance in place. This might be life insurance to pay off a debt such as a mortgage if you were to die before it comes to an end, or some kind of lump sum plan or income protection if you are still working. 

If you are considering taking an annuity to provide retirement income, bear in mind what would happen to the income stream if you died, and ensure you spouse would have enough to live on.

Five reasons you might need life insurance.

4. Review your savings and investments

Even when your retirement income is secure, you need to make sure you are getting the most from your savings and investments. 

A remarkable number of people buy financial products that have flexibility built in – such as an ability to switch between funds – and never make use of the feature. 

Likewise, people open savings accounts and neglect to move the money to get a better rate when their original choice fails to perform. Make sure your savings are working for you and not the bank.

Read Annie Shaw's guide to common investment mistakes.

5. Review your tax status

Are your affairs arranged so that you pay the least amount of tax that you need to? Are you making the most of tax-free allowances? Have you moved assets between spouses who pay tax at different rates to make maximum use of the lower rate? Are you, in fact, paying the right amount of tax in the first place? 

HM Revenue and Customs is cracking down on various sectors, and the latest to benefit from the taxman’s attention are those people who have sold investment property, or who are renting out a home while living somewhere else, and have failed to pay capital gains tax or income tax, as appropriate. Might you get caught out?

Six taxes you can legally avoid.

6. Make plans to minimise tax when you die

As well as making a Will, you should look at how much inheritance tax your estate might need to pay when you die, and see if you can do something to minimise it while you are still alive. This could include giving assets away, setting up trusts or simply spending surplus cash. Make sure you don’t pay IHT needlessly.

Read Paul Lewis' guide to inheritance tax.

7. Lasting Power of Attorney

Consider what would happen if you became incapable of making decisions about your finances or your health care because of advanced age or infirmity. 

It’s never too soon to create a Lasting Power of Attorney, to give someone else the authority to look after your financial affairs or make decisions about your health or social care when you can no longer do so. 

The power only takes effect once it is registered with the Office of the Public Guardian – which is when you need to use it and this could be long after the documents are actually drawn up – so you don’t need to worry that someone can get control of your affairs behind your back. 

You can also build in multiple safeguards against abuse, such requiring more than one person to authorise payments or take decisions on your behalf and you can give different people the right to make different types of decision.

Finally, when you have made a Will, bought insurance, topped up your pension, updated all your savings accounts and put all the paperwork in a safe place, you can make yourself a nice cup of tea – or a stiff drink – as the mood takes you. 

But don’t forget to make sure that members of your family know where they can find the paperwork and passbooks in case the worst should happen.

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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.