Chris Thorpe, Author at Agile IFA

The tapering of the Personal Allowance means some higher-rate taxpayers effectively pay an Income Tax rate of 60%, sometimes without realising. Fortunately, if you’re affected, there could be ways to reduce your tax bill.

A report in the Telegraph suggests 1.35 million workers were affected by the 60% tax trap in 2023/24. Collectively, they paid an extra £4.7 billion to the Treasury. Read on to find out if you could unwittingly be paying a higher rate of Income Tax than you expect.

The tax trap affects those earning more than £100,000

You might think the highest rate of Income Tax is 45%, and officially you’d be correct. Most people pay the standard rates of Income Tax. In 2024/25, Income Tax rates and bands are:

Please note, that different Income Tax bands and rates apply in Scotland.

However, the Personal Allowance is reduced by £1 for every £2 you earn over £100,000. If you earn more than £125,140, you don’t have a Personal Allowance and pay tax on all your income.

For example, if you earn £101,000, on the £1,000 above the threshold, you’d pay £400 of Income Tax at the higher rate. In addition, you’d lose £500 of your Personal Allowance, so this portion of your income would also be subject to Income Tax at 40%, adding up to £200.

So, out of the £1,000 you’ve earned above the tapered Personal Allowance threshold, you’d only take home £400 – a 60% effective tax rate. It’s led to the tapering being dubbed a “stealth tax” in the media.

Further compounding the issue is the fact that the Personal Allowance and Income Tax bands are frozen until 2028.

While the thresholds are frozen, many people are likely to receive wage increases. As a result, more people are expected to be caught in the 60% tax trap in the coming years.

Don’t forget your salary might not be your only income that’s considered when calculating your Income Tax bill. For example, you could be liable for interest earned on savings that aren’t held in a tax-efficient wrapper.

3 legal ways to avoid falling into the 60% tax trap

If you’re affected by the tapered Personal Allowance, thinking about how you structure your earnings may provide an opportunity to reduce how much you’re giving to the taxman. Here are three excellent options you might want to consider.

1. Boost your pension contributions

One of the simplest ways to avoid paying 60% tax if you could be affected is to increase your pension contributions.

Your taxable income is calculated after pension contributions have been deducted. As a result, boosting pension contributions could be used to reduce your adjusted net income so you retain the full Personal Allowance or reduce the proportion you lose.

Increasing pension contributions could help you secure a more comfortable retirement too. However, keep in mind that you cannot usually access your pension savings until you’re 55 (rising to 57 in 2028).

2. Use a salary sacrifice scheme

If your workplace has a salary sacrifice scheme, it could also provide a useful way to reduce your overall tax liability.

Salary sacrifice enables you to exchange a part of your salary for non-cash benefits from your employer. This could include higher pension contributions, childcare vouchers, or the ability to lease a car.

By essentially giving up part of your income, you might be able to bring your taxable income below the threshold for the tapered Personal Allowance.

You should note that salary sacrifice options vary between employers, so it may be worthwhile to check your employee handbook to see if any options could suit you.

3. Make charitable donations from your income

If you’d like to reduce your Income Tax bill and support good causes, you could make a charitable donation. Again, by deducting donations from your salary before tax is calculated, you could manage how much of the Personal Allowance you lose.

Contact us to talk about how to manage your tax bill effectively

There may be other steps you could take to reduce your overall tax bill. A tailored financial plan will consider your tax liabilities, including from other sources, such as your savings and investments, to highlight potential ways to cut the amount you pay to the taxman.

If you’d like to arrange a meeting, please get in touch.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Every day you’ll take mental shortcuts, known as “heuristics”, to help you solve problems quickly. This can be incredibly useful in some circumstances and help you avoid becoming overwhelmed by decisions. Yet, when you’re making large decisions, including how to handle your finances, it could be harmful.

Heuristics are necessary for people to navigate their day. Indeed, according to a report in Harvard Business Review, the average adult makes more than 30,000 decisions every day, from what you’ll eat to what you’ll say.

Gerald Zaltman, a Harvard Business School professor, suggests that 95% of our cognition occurs in the subconscious mind. He adds this is necessary – your brain would short-circuit if it had to weigh up each decision one by one.

So, mental shortcuts are essential for functioning. However, this “autopilot mode” could lead to bias and decisions that aren’t right for you. Recognising which decisions would benefit from more careful analysis could help you seek out opportunities and identify potential risks you might have overlooked if you took a mental shortcut.

4 mental shortcuts that may affect your financial decisions

1. Anchoring effect

Anchoring effect is a cognitive bias where your view and decisions are fixed on a particular piece of information.

For example, if you read in the newspaper that a company is poised to grow and its value is above the current market valuation, you might fixate on this number. You may dismiss new information that suggests the initial figure was incorrect because you’ve anchored your view.

It’s a bias that could lead to you minimising potential risks or failing to adjust your view as circumstances change.

Anchoring can be difficult to avoid, but taking time to review new information and the reliability of sources could help identify where it may affect your decisions.

2. Herd mentality

Herd mentality can affect many areas of your life, not just your financial decisions.

The instinct that there’s safety in numbers could lead to you following the crowd even if it’s not the right option for you. You may simply believe that a large group of people can’t all be wrong, or that others have carried out research, so you can rely on their decision-making skills.

However, herd mentality overlooks the fact that a decision that may be right for one person isn’t necessarily the right option for another.

If you hear a group of your friends are investing in a particular fund that they’re excited about, you might be tempted to do the same. Yet, perhaps they’re investing with a very different time frame or are taking more risk than is appropriate for you.

Assessing financial opportunities with your circumstances in mind could help you avoid following the crowd.

3. Confirmation bias

Confirmation bias refers to the tendency to favour information that supports your beliefs and ignore the data that refutes them.

Confirmation bias can be a challenge when you’re making financial decisions because it might mean you bypass key pieces of information simply because it doesn’t support your preconceived notions. So, it could mean steps to carry out research aren’t as valuable as you might expect.

Not letting your views cloud how you view information can be challenging. Yet, taking a step back to weigh up the value of the information objectively could help you make better financial decisions.

4. Familiarity bias

You might gain some comfort from sticking to what you know. However, familiarity bias could mean you miss out on opportunities and, in some cases, might even mean you’re taking more risk.

For instance, from an investment perspective, it might mean that your portfolio is heavily invested in one geographical region or sector. While the familiar might feel “safer”, the lack of diversity in your investment could actually mean you’re taking more risk.

Similarly, many people choose to hold their money in a savings account where it could be falling in value in real terms once inflation is considered because they’re scared to invest.

According to a survey from interactive investor, 78% of UK adults don’t invest and a lack of knowledge is one of the key reasons. While investing isn’t right in all circumstances, some people may be neglecting to consider investing simply because saving is more familiar.

Working with a financial planner could help you step out of your comfort zone to seize opportunities that are right for you.

Working with a financial planner could help you view your finances from a different perspective

Looking at your finances from a different perspective could help you identify where heuristics could be affecting your decision-making skills. A tailored financial plan could help you set out a path that’s right for you, based on your goals and circumstances, and may help you reduce the effect of bias.

If you’d like to arrange a meeting to discuss how we could support your goals, please get in touch.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Often one of the biggest benefits of a bespoke financial plan is that it allows you to devise a blueprint to follow, with your goals placed at the centre. It’s a strategy that could help you focus on what you want to achieve in life and make working with a professional even more valuable to you.

Over the last few months, you’ve read about how a financial plan could help you grow your wealth and the value of non-tangible benefits, like feeling more confident about your finances. Now, read on to discover how financial planning might help you align your decisions with your aspirations.

Your goals are the focus of your financial plan

While you might think of financial planning as being about figures and growing your wealth, it goes far beyond this. Financial planning aims to help you reach your goals, whether you want to retire early, have the money to book holidays to exciting destinations or be in a position to offer support to your family.

To achieve this aim, financial planning starts by understanding what your goals are. Having a clear idea about what your aspirations are could allow you to make decisions that enable you to turn them into a reality. So, defining what success means for you is often crucial.

For example, you might start by saying your family is a priority and you want to offer them support. But what does this look like? Do you want to offer financial support, such as a deposit when they’re buying a home, or do you want to have greater freedom so you can look after your grandchildren?

As financial planners, we can help you define your life goals and understand what’s possible.

Cashflow modelling could help you visualise the impact of your decisions

One of the challenges of setting out how to reach your long-term goals is that it can be difficult to know whether the decisions you’re making will support or harm them.

Cashflow modelling can be used as an invaluable tool to help you visualise the impact decisions might have on your financial future and, so, on your goals.

When using cashflow modelling you input data like the value of your assets now. You can then model how different decisions will affect the outcome. It’s a way of understanding how the decisions you make now could affect goals that are years away.

If your goal is to retire early, you might update the information used for cashflow modelling to answer questions like:

Could I afford to retire five years earlier?
If I retire when I’m 55, what income could my pension sustainably provide?
Could I take a tax-free lump sum from my pension when I first retire and still be financially secure?
How would increasing or decreasing my pension contributions affect the value of my pension pot at retirement?

Armed with the information cashflow modelling provides, you’re often in a better position to make financial decisions that reflect your aspirations.

A financial plan may keep your goals on track as your circumstances change

You might set out clear goals now, but as your circumstances and desires change, they may not be the same in five years.

A family illness might mean you decide to step away from work sooner than you expected to support them. Or an unexpected inheritance may mean you’re able to secure goals you previously thought were out of reach.

By having an ongoing relationship with a financial planner and regular reviews, which will include reassessing your aspirations, we can help you adjust your plan, so it continues to suit your needs.

It’s not just your goals that could lead to change either.

You might come across an investment opportunity and decide you want to divert some of the money to this. A financial plan could help you assess if it’s the right decision for you and how it might affect other parts of your plan.

For instance, could choosing a higher-risk investment rather than contributing to your pension place your comfortable retirement at risk? Or are you in a position where you can invest and still feel confident about your retirement?

By modelling opportunities or obstacles using cashflow modelling, working with a financial planner could help you understand the impact of making changes to your plans as opportunities arise.

Contact us to talk about how a financial plan could be valuable for you

As you’ve read over the last few months, a tailored financial plan could provide financial and non-financial benefits. If you’d like to explore how a financial plan could add value to your life, please contact us.

In an initial meeting, we can discuss how we could work together to help you reach your goals.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate cashflow modelling.

Impulsive decision-making can be useful in some circumstances. Yet, when it comes to finances, it could lead to choices that aren’t right for you and even harm your long-term financial security. Read on to find out how you could cut the effect of impulsive financial decisions.

When you think of impulsive financial decisions, your mind might turn to shopping first. How often have you picked up something extra when grocery shopping or purchased an item online after spotting an advert?

Indeed, according to a report in the Independent, the average shopper in the UK makes seven big impulse buys each year. The most common reason for impulse purchases is to enjoy a treat, but the average person spends almost £184 a year on items they later regret purchasing.

It’s not just shopping where impulsive decisions can affect your finances either.

You might make a snap decision when you’re dealing with large financial choices too, such as how to invest your money. It could mean you haven’t fully thought through your decisions, and it may affect your long-term finances.

If you want to reduce the number of impulsive financial decisions you make, here are five effective tips that could help.

1. Give yourself a breathing period

If you’re making a large financial decision that could affect your future, give it the attention it deserves. After making a financial decision, wait a few days before you act on it – you could find your mind has changed after you’ve given it further thought.

So, if you’re thinking about withdrawing a lump sum from your pension or changing your investment strategy, give yourself a breathing period to consider if it’s the right course for you.

It’s a simple step that could be useful if you’d benefit from finding out further information, or if emotions are clouding your judgement. You might also want to speak to someone during the waiting period, such as your partner or financial planner, to gain a different perspective.

You may still decide to go ahead with your initial decision, and having spent more time weighing up your options, you could feel more confident about the outcome.

2. Separate your money into pots

It can be difficult to balance different financial needs. Giving different pots of money a defined purpose could help you assess whether you’re in a position to make an impulse purchase.

For instance, you might have an account that contains your disposable income that you can use for spontaneous spending if you spot something you’d like. In contrast, if you know the money in another account is your emergency fund or earmarked for your retirement, you might be less likely to dip into it when making an impulsive purchase.

3. Question what’s driving your decisions

There are a lot of factors that could be driving your impulsive decisions. Interrogating the reasons could highlight when emotions are affecting your judgment.

For instance, are you considering investing in a particular asset because you’re worried about missing out? Or are you tempted to splash out after you’ve had a hard day at work?

Emotions could impair your ability to effectively assess which option is right for you and your long-term plans. So, next time you are about to make a quick financial decision, ask yourself what could be behind your reasoning.

4. Tune out the noise

From the media to talking with friends, there can be a lot of noise that affects how you feel about your finances and the decisions you make.

Investing is a great example. On any given day you might listen to or read the news and find headlines about company stocks that are “skyrocketing” or “tumbling”. These types of headlines can elicit an emotional response that might lead to an impulsive decision.

After hearing about an investment opportunity that’s delivered exceptional results over the last few months, you might be excited to be a part of it. On the other hand, if you hear a company you invest in is having a rough time, you might be fearful and consider withdrawing your money.

Try to tune out the noise. When you created your investment strategy, you likely considered a whole range of factors, including your reason for investing and your risk profile, to invest in a way that suits you. So, focusing on this, rather than the noise, could reduce the number of impulsive decisions you make.

5. Create a tailored financial plan

A tailored financial plan could lead to you better understanding your finances and feeling more comfortable with the decisions you’ve made. As a result, you might be less tempted to make impulsive changes.

For example, if you’re retired and you’ve calculated the income you can sustainably access from your pension to create lifelong security, you may be less likely to take out an additional sum without assessing the long-term impact it could have first.

As financial planners, we can work with you to create a tailored financial plan that reflects your life goals. We’ll also be here to help you understand the effect your decisions could have on your long-term finances.

Please contact us to arrange a meeting to talk about your financial plan.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

On the back of data showing some countries have exited recessions at the end of the first quarter of 2024 and inflation falling, several market indexes reached record highs in May. Read on to find out what else may have affected the markets and your investment portfolio.

UK

Dominating headlines towards the end of May was prime minister Rishi Sunak calling a general election. Sunak made the seemingly snap decision following positive inflation news despite polls suggesting the Conservative government is trailing the Labour Party.

The general election will take place on Thursday 4 July. The uncertainty over the next few weeks could lead to markets being bumpy as they react to the latest information and assumptions. Remember, ups and downs are a part of investing and it’s important to focus on your long-term goals during periods of volatility.

The latest figures from the Office for National Statistics (ONS) show the UK is nearing the Bank of England’s (BoE) 2% inflation target. In the 12 months to April 2024, inflation was 2.3%.

Sunak said the data was proof the Conservative’s plan was working and “brighter days are ahead”. In response, the Labour Party accused the government of celebrating a “tone-deaf victory lap”.

The BoE voted to hold its base interest rate at 5.25%. Borrowers keen for rates to start falling could receive some good news this year though. BoE governor Andrew Bailey said a cut will likely come in the coming quarters if inflation continues to fall, and he hinted the Bank could make cuts faster than the market expects.

Data on the economy was positive too. After the UK fell into a technical recession – defined as two consecutive quarters of negative growth – at the end of 2023, ONS figures confirm the UK economy grew in the first quarter of 2024. GDP increased by 0.4% in March 2024, following growth of 0.3% and 0.2% in January and February respectively.

Yet, the Organisation for Economic Co-operation and Development warned the UK would have the weakest growth across G7 countries in 2025. The organisation predicts GDP will rise by just 1% next year.

The latest readings from the S&P Global’s Purchasing Managers’ Index (PMI) support the ONS GDP data. PMI data provides an indicator of business conditions, such as output and new orders.

In April 2024, the service sector posted its fastest business activity growth in almost a year. The sector makes up around three-quarters of the UK economy, so strong growth will have helped pull the UK out of the recession quickly.

There was good news in the construction sector as well, with the PMI information showing growth reached a 14-month high. However, the data indicates the manufacturing sector contracted in April. One of the challenges facing manufacturing firms was purchasing costs rising for four consecutive months.

May was an excellent month for the FTSE 100 – an index of the 100 largest companies on the London Stock Exchange. It reached record highs several times throughout the month as markets reacted to speculation that interest rates would fall.

On 15 May, the index jumped by around 0.5% to reach 8,474 points. The top riser was credit data firm Experian after it reported growth at the top end of their expectations for the last financial year, which led to shares rising by more than 8%.

Europe

The wider continent fared similarly to the UK.

Eurostat confirmed that the eurozone is out of a recession. The economy shrank by 0.1% in the last two quarters of 2023 but posted growth of 0.3% in the first quarter of 2024. Major economies, including Germany, France, Spain, and Italy, grew in the first three months of the year.

However, the European Commission warned external factors could place economic growth at risk. These risks include ongoing Ukraine-Russia and Israel-Gaza conflicts.

In the eurozone, inflation was stable at 2.4% in the year to April 2024. While the European Central Bank has also yet to cut interest rates, it’s expected that it may do so as early as June if inflation falls.

European markets were also influenced by expectations that an interest rate cut could be imminent. Sliding oil prices led to modest gains on 8 May when France’s CAC was up 0.6% and Germany’s DAX increased by 0.1%.

US

Figures from the US show inflation fell to 3.4% in the year to April 2024. It led to Wall Street reaching a record high on 15 May as both the S&P 500 and the tech-focused Nasdaq index rose.

Data could suggest that US business confidence is falling after fewer jobs were added to the US economy than expected in April. Businesses added around 175,000 jobs compared to the 243,000 economists had predicted. Unemployment also increased slightly from 3.8% to 3.9%, which had a knock-on effect on the power of the dollar.

The Dow Jones index, which contains 30 major US companies, hit a milestone this month. The index reached 40,000 points for the first time on 16 May. The biggest riser was retailer Walmart, which was up 6%.

Entertainment giant Disney also hit a landmark in May – its streaming platform Disney+ turned a profit for the first time since it launched four years ago. Despite the news, Disney’s shares dropped by more than 5% in pre-market trading on 7 May as results have still fallen short of expectations.

Asia

On 9 May, encouraging trade data from China, which showed both exports and imports have returned to growth, boosted markets around the world.

However, China could face headwinds. After speculation over the last few months that the US would introduce trade tariffs, US president Joe Biden announced new tariffs would come into force on 1 August 2024.

There will be a 100% tariff on Chinese-made electric vehicles. Tariffs will also increase for other items, including lithium batteries, critical minerals, solar cells, and semiconductors.

The US said the tariff would help stop subsidised Chinese goods in the US market from stifling the growth of the American green technology sector. China responded by saying the move undermined fair trade and it’s US consumers who would bear the brunt of the additional costs.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Figures from the Association of British Insurers (ABI) suggest a record number of families are taking out income protection to create a safety net. Read on to find out how income protection works and whether it could be valuable for you.

Income protection would pay out a regular income if you were unable to work due to an accident or illness. As a result, it could provide you with a way to keep up with your financial commitments if your income unexpectedly stops. Income protection will normally continue to pay an income until you’re able to return to work, retire, or the term ends.

Usually, the sum provided through income protection is a proportion of your regular salary, such as 60%. You’ll need to pay a monthly premium to maintain the cover, the cost of which will depend on a range of factors, such as your age and lifestyle. While you might not want to increase your expenses, income protection could be cheaper than you think, and it may substantially improve your financial resilience.

Economic uncertainty could be driving more people to consider their financial resilience

According to the ABI statistics, a record 247,000 people took out income protection in 2023. The figure is almost four times higher than it was just 10 years ago. Critical illness insurance, which would pay out a lump sum if you were diagnosed with a covered illness, saw a similar rise between 2013 and 2023.

Yvonne Braun, director of policy, long-term savings, health and protection at the ABI, said: “Financial resilience – the ability to withstand a financial shock – is a hugely important issue. It’s encouraging to see that so many people recognise that income protection and critical illness insurance are an important part of financial planning and play a crucial role in providing a financial safety net.”

There are many reasons why you might consider how to improve your financial safety net.

A change in your circumstances can often be a trigger. For example, if you’ve purchased a property or have welcomed children, you may reevaluate your finances and take steps to improve your ability to weather a financial shock.

Wider economic circumstances are also likely to have played a role in the rising number of households choosing to take out income protection.

Over the last few years, the Covid-19 pandemic and subsequent period of high inflation may have led to more families facing unexpected changes to their budget. Indeed, a BBC report suggests 7 million adults felt “heavily burdened” by their finances at the start of 2024.

With many families having to absorb higher essential costs, from energy bills to grocery shopping, it’s perhaps not surprising that more are looking for ways to ensure they can overcome losing their income.

Income protection could safeguard your short- and long-term finances

If taking time off work might place pressure on your finances, it may be worth considering if income protection could be right for you.

It’s not just your income you may want to weigh up either. For example, your partner may be the main income earner in your household while you are responsible for the majority of childcare. In this scenario, you might want to consider how your household’s expenses would change if you were ill – your childcare bill could rise significantly or your partner might be forced to take time off work while you recover.

Income protection could complement your wider financial safety net

While you may already have measures in place to provide a short-term income if you are unable to work, income protection could still be useful.

You may have an emergency fund you can draw on, but how long would it last, and what would happen if you were unable to work for longer than expected? Similarly, your employer might provide enhanced sick pay, but this is often for a defined period, such as six months.

Assessing your financial resilience could help you see how income protection might complement your wider financial plan.

A financial shock could affect your long-term finances too

When you experience a financial shock, your focus is likely to be on the immediate impact it has on your budget. Yet, it could have long-term implications too.

If you’re unable to work you might stop paying into your pension, or cut back how much you’re adding to a savings account. Depending on your circumstances, income protection could allow you to stick to your wider financial plan. It may help you to maintain non-essential outgoings that might be crucial for your long-term goals.

Get in touch to discuss your financial resilience

Taking steps to improve your financial resilience could help you feel more confident about your future and mean you’re in a better position to overcome unexpected shocks. Please contact us to talk about your financial plan and whether income protection or other measures could be right for you.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that income protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

70 years ago, the BBC broadcast its first daily television news programme. Since then, round-the-clock news has become available, and you can get the latest headlines with a few taps on your smartphone. While being connected can be positive, for investors, it can make periods of volatility and choosing an investment even more difficult. Read on to find out why.

On 5 July 1954, Richard Baker delivered the latest news, which started with an update on truce talks being held near Hanoi, Vietnam, and an item on French troop movements in Tunisia. It wasn’t met with universal approval. Indeed, the BBC received feedback stating it was “absolutely ghastly” and “as visually impressive as the fat stock prices”.

Sir Ian Jacob, who was BBC director at the time, noted that there were challenges because many main news items are “not easily made visual”. However, he added that he believed it was the start of something “extremely significant for the future”.

But how does this relate to investing? 70 years ago, you may have read about investment performance or the latest tip in the newspaper or heard a segment on the radio. Now, you can find out about stock market movements in seconds, and it could lead to knee-jerk decisions.

Too much “noise” could lead to poor investment decisions

Imagine you hear about stock market volatility affecting your portfolio now. You may hear in the news how stocks are “plummeting” or that it’s the worst day for a particular index in a year. How do you feel? You might worry about what it means for your financial future. As a result, it could lead to you making rash decisions that aren’t right for you.

Yet, 70 years ago before there were daily TV news programmes on the BBC, you might not hear about the volatility right away. The market and your portfolio could even have recovered before you knew.

Being in the loop when it comes to stock market movements can work the other way too. You might see a segment about how technology businesses are doing well, and it tempts you to invest without considering how it might affect your overall portfolio or risk profile.

So, being exposed to too much “noise” may lead to investors making decisions based on short-term movements. However, if you look at some of the big events, and their impact on stock markets over the last 70 years, it indicates that investors who stuck to their investment strategy could have benefited.

The last 70 years demonstrate why a long-term view often makes sense for investors

When Richard Baker sat down to deliver the BBC bulletin, the stock market was doing well. After decades of uncertainty due to the world wars, by the late 1950s, it was booming. Indeed, work began on the new Stock Exchange Tower in 1967, which became a London City landmark at 26 storeys.

The markets didn’t remain stable though. The early 1990s brought a recession that led to unemployment of more than 12% in the UK. Then, the dot-com bubble saw technology stocks soaring at the end of the decade as investors were excited by the widespread adoption of the internet and innovative start-ups before the bubble burst in 2000.

Countless historical events have affected the markets. In the last decade, the 2016 Brexit vote and the pandemic in 2020 led to markets falling.

Despite the turbulence and the attention-grabbing headlines of the last seven decades, the overall trend in investment markets is an upward one. Once you look at the bigger picture, it suggests investing with a long-term view is savvy for most investors.

Indeed, take a look at the FTSE 100 – an index of the 100 largest companies on the London Stock Exchange. It launched in 1984 and started with a benchmark of 1,000 points. On 3 May 2024, it hit a record high at 8,248 points.

Of course, you cannot guarantee investment returns. It’s important you consider your goals and remember that all investments carry some risk. You may want to consider your risk profile and wider financial circumstances when creating an investment strategy.

Get in touch to talk about your investment strategy

If you’d like to understand how to create an investment strategy that reflects your goals, or would like to review your current portfolio, please contact us. We’ll help you build an investment strategy that reflects your goals and circumstances.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

As financial planners, we often talk about the importance of working towards long-term goals and security. As part of your financial plan, you might be putting money into a pension for retirement or building an emergency fund to safeguard your finances if you experience a shock.

Considering your long-term ambitions is often important for turning them into a reality. Yet, enjoying the present is just as essential. While it can be difficult to balance your lifestyle needs now with those of your future, it may help you get more out of life.

Overlooking the present could mean you miss out on experiences

Planning for the future is important, but you don’t know what’s around the corner. If you take today for granted or put off experiences until later in life you could end up missing out.

You might cut back now and pool all your money into a pension with the plan to travel extensively once you give up work. But if you suffered from ill health before you reached that point, you might not have the opportunity to visit bucket-list destinations or have experiences you’ve been looking forward to for years.

The Great British Retirement Survey 2023 revealed that almost a fifth of people aged between 56 and 65 have faced a major life event that has changed their retirement plans. The most common reason was ill health.

Similarly, a higher-paying job might offer the chance to save more for retirement. But if you’re family-oriented and want to strike a better work-life balance, a promotion that will lead to longer working hours or more responsibility might not be right for you when you weigh up the effect it could have on your family life.

For many people, balancing short- and long-term financial needs is important for living a fulfilling life.

Doing things now and so giving yourself fond memories to look back on could improve your sense of wellbeing. This could be something small like enjoying a nice meal out with friends, or a grander expense, such as planning a trip to hike Machu Picchu in Peru if you love to travel.

Not only could embracing today in your financial plan make you happier now, but it could motivate you to stay on track when you’re working towards long-term goals. Perhaps a holiday that allows you to relax and focus on the things you love will mean you’re more inclined to top up your pension so you can retire and enjoy a slower pace of life sooner.

An effective financial plan can help you balance the present and future

It can be difficult to balance your short- and long-term needs. One of the key challenges is understanding how much you need for your future, as well as considering the effect unexpected events might have. That’s why working with a financial planner could prove invaluable.

Cashflow forecasting is one tool we could use to help you assess how to strike the right balance. It offers a way to visualise how your wealth might change based on the decisions you make.

Let’s say you want to increase your disposable income, so you have the freedom to spend money on days out doing things you enjoy, such as going to the theatre, eating out, or visiting historical locations. To do this, you may need to reduce the amount you are allocating elsewhere, such as your monthly savings or investments. Cashflow forecasting could let you see the impact this decision would have on your future finances.

Armed with this information, you can start to understand how to balance your expenses now with your future goals. You might find your long-term finances would still provide the security you need even if you spent more now, so you feel comfortable adjusting your expenses. On the other hand, you may find a compromise if it could affect your long-term goals.

Having a clear financial plan could mean you’re able to enjoy the present more too.

Financial concerns can take the joy out of experiences you might otherwise have been looking forward to. So, knowing that you’ve taken steps to create long-term financial security may help you live in the moment and take in what life has to offer.

Get in touch to talk about a financial plan that balances your short- and long-term needs

If you’d like to create a financial plan that balances your lifestyle needs now with long-term goals, please get in touch. We’ll work with you to understand what’s important to you and how you might use your assets to create financial security that lets you enjoy your life now and in the future.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The Financial Conduct Authority does not regulate cashflow planning.

Consider the benefits of financial planning. If the first advantage that comes to mind is the opportunity to grow your wealth, you might be overlooking some of the intangible benefits that could improve your wellbeing.

Last month, you read about the potential financial benefits of working with a financial planner and how it could help you reach your goals.

Now, read on to learn more about some of the wellbeing benefits. While intangible benefits can be harder to quantify, they are just as important and might be something you value as much as growing your wealth.

1. Working with a professional could offer you peace of mind

A report in Professional Adviser suggests that one of the key reasons many people use a financial planner is the peace of mind it offers. In fact, in a survey of people with more than £300,000 of investable assets, more than half said this was important to them.

Worrying about your finances may affect your mental health. A survey from Standard Life found that 47% of women and 33% of men feel worried, anxious, stressed, or overwhelmed due to economic uncertainty.

A financial plan can help you focus on what you want to achieve in the future and the steps you might take to provide security, even if the unexpected happens. As a result, it could support your overall mental wellbeing.

2. A financial plan could improve your knowledge and confidence

Having someone you trust to turn to when you have financial questions could take a weight off your mind, and it could boost your finances too.

According to research from Moneybox, two-thirds of UK adults are, on average, £65,000 worse off because of low levels of financial confidence and knowledge.

The study found that less than a third of people claim they are very confident when managing finances. What’s more, 64% said they have missed out on financial opportunities in life – 35% blamed a lack of financial knowledge and 29% cited low financial confidence.

When asked why they struggled to manage their finances, the participants said they didn’t know where to start, found the topic overwhelming or struggled because of jargon. Yet, just 14% had spoken to a financial planner.

Working with a financial planner could mean you feel more confident about the steps you’re taking.

3. A financial planner could give you more time to focus on what’s important

Ensuring your financial plan remains on track and continues to reflect your circumstances can be time-consuming.

As well as keeping on top of your finances, factors outside of your control could also affect your financial plan. For example, if the government made changes to tax allowances, it could potentially lead to a higher tax bill or an opportunity to improve tax efficiency.

When you’re working with a financial planner, you can rest assured that your finances are in safe hands and focus on what’s most important to you.

4. You’re more likely to reach your goals with a clear plan

Only 17% of people in the UK have a plan to achieve their long-term money goals, according to data from the Aegon Wellbeing Index. In addition, only a quarter of people surveyed said they have a concrete vision of the things and experiences their future self might want.

If you don’t clearly outline your goals and how you’ll achieve them, it can be difficult to measure your success and stay on track. Understanding what you want to achieve now and in the future is an integral part of financial planning.

While you might link effective financial planning to growing your wealth, that’s not always the case. Indeed, in some circumstances, your plan might involve depleting your assets to allow you to reach your goals. For instance, when you retire, you’re likely to switch from accumulating wealth to turning your assets into an income stream.

A financial planner can help you assess how to manage your finances with your goals in mind.

Contact us to talk about your financial plan

If you’d like to discuss how a financial plan could support your wellbeing and help you create a path to reaching your goals, please contact us to arrange a meeting.

Next month, read our blog to discover how financial planning could lead to you making decisions that align with your aspirations and deliver even greater value.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.