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    Common myths for financial planning

    The thought of financial planning can be overwhelming and the amount of conflicting advice can leave you feeling lost when it comes to planning ahead to make the most of your financial situation. To help, we explore a number of common myths when it comes to financial planning.

    Myth: Financial planning is only needed if you’re wealthy

    Although it is wise to plan your finances well if you have large amounts of wealth, it can still be hugely valuable even for those with modest wealth. Understanding your financial situation in detail and how to make the most out of it can help you plan in a way that is going to be most beneficial, and investing even a small amount can still provide good returns over time.

    It’s important to be clear of your lifestyle aspirations and then tailor your finances to achieving those goals, this is something your financial planner will be able to help you map out and ensure you’re planning ahead accordingly for the short, medium and longer term.

    At PM+M, once we have spent time getting to know our clients and understanding their needs and objectives, we can then test different scenarios using our cashflow forecast software to understand the best plan of action for the individual circumstances and objectives.

    Myth: I’m too young for retirement planning

    Retirement can be achieved at a variety of ages depending on many different factors, some people are able to retire much earlier than others by working extremely hard and with some extensive financial planning. If this is something you are aiming for, or even if you simply wish to plan ahead to ensure you are going to be comfortable in later life, the sooner you start planning the better!

    In terms of your pension for instance, the earlier you begin saving into your pension, the more time your money has to grow and it is highly likely something you will thank your younger self for in years to come.

    By looking ahead as to what you would like your retirement to look like in an ideal world, you are able to plan what steps you would need to take financially to allow you to achieve this. The more time you have to do this, the more you are able to spread the financial impact across a greater number of years, therefore reducing the impact you are likely to feel on your finances. This would also provide more time to make any necessary changes, should your desired retirement plans change.

    We can use our cashflow forecast software to test different scenarios to help understand the best plan of action for your individual circumstances and objectives.

    Myth: I can only invest if I have large amounts of money

    Obviously the more money you invest, the greater returns you are likely to see, but this does not mean it’s not worth investing smaller amounts of money.

    Whatever the amount, you may want to consider putting your money into medium or long-term investments (five years or more). Unlike savings, investments have more potential to grow over time. You have tax efficient options, for example, an ISA or a pension. A small amount regularly invested each month over a few years can often result in a good return over time, providing a strong investment strategy is in place.

    At PM+M, we offer a bespoke managed portfolio service (in partnership with AJ Bell) which we continually monitor and proactively make fund and asset allocation changes when we feel as though this is necessary. You can find out more about our portfolio service here.

    Myth: The State Pension will be enough for my retirement

    Depending on what you want to achieve from your retirement, you may find that relying on the state pension could leave you drastically short of achieving what you have in mind. The full State Pension is £221.20 per week for the 2024/25 tax year (up from £203.85 in 2023/24), providing you have paid the necessary 35 years National Insurance. This equates to around £11,502 a year which works out much less than you would earn if you were working a full-time job on minimum wage, this comparison helps put the figures into perspective.

    With the ever-rising costs of living, it is certainly worth doing your sums carefully and if you are planning on relying solely on your state pension, that it will enable you to live a lifestyle you are comfortable with in retirement.

    However, the State Pension does provide an invaluable income underpin.

    Get in touch

    For further information or advice on any of the common myths discussed above, contact a member of our financial planning team today to talk through your personal circumstances, email or 01254 679131.

    The information contained within this article is purely for information purposes and does not constitute financial advice.

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