Financial planning tips for 2021

In our latest blog, James McIntyre (director in our wealth management team) outlines some key financial planning points to consider in 2021 and advice on creating an effective financial plan.

As we reflect on a rather difficult year for so many people around the globe, the start of a new year presents us with the opportunity to plan for the future.

Below I have summarised a few key tips to support your financial planning journey in 2021 to hopefully help you achieve your long-term objectives.

Set your financial planning goals

The starting point with any plan must be the destination (from there, we can work backwords). Depending on where you are in the human life cycle, you firstly need to be asking yourself questions such as:

– What level of income do I need and desire during retirement?

– What value do I need to sell the business for to ensure I can live my desired lifestyle?

– What do I want to leave my loved ones upon death?

– How much do I need to save in order to be able send my children to the school or university of choice?

– How much capital would my family need if I were to become seriously ill or die?

It’s critical to discuss your objectives with your financial adviser to ensure your financial plan is built around them. At PM+M, cashflow modelling is an invaluable tool that we use to understand your goals so we can work with you to put a financial plan in place.

If we know what you need and when it’s needed by, working within the parameters of a defined set of assumptions, we can forecast what you need to do or how much you will need to save in order to achieve your financial planning goals.

Choose proactive fund management

As we approached 2020, when speculating about the trajectory of investment markets, many were talking ‘US Elections,’ ‘Brexit’ and ‘Trade Wars.’ Nobody could have foreseen the COVID-19 pandemic however, which sent shockwaves through the investment markets.

Therefore, an important financial planning tool to consider is a fully proactive investment approach via a multi-asset model portfolio. Once you opt for this approach and make investments, a skilful team can implement changes to the underlying asset allocation (the make-up of the portfolio across different investment types) allowing them to maneuverer the portfolios quickly as circumstances dictate.

This means that investors have the reassurance that they are invested in the ‘best way of thinking’ at all points in between their review meetings.

If you are invested for the long term, consider a proactive investment approach and hold enough cash to provide liquidity for a defined period of time, i.e. to minimise the risk of having to sell down assets during a difficult market cycle; you have the potential ‘recipe’ for success.

Make pension and ISA contributions

Once you have identified your objectives, reviewed your cashflow forecast and considered your investment fund management approach, you then need to implement the plan.

Pension and ISA contributions provide a tax efficient means of achieving your long-term goals. Now is the perfect time to consider your budgets for 2021 so that you don’t miss out on these invaluable allowances.

Prepare a plan B

Of course, it’s critical to set financial planning goals to ensure that you have a sense of direction, but it’s also important that you have a plan B. If 2020 has taught us anything, it’s that we need to be prepared for the unexpected.

It’s paramount that you consider your contingency plan to protect your loved ones and/or business partners in the event of sickness, serious illness or death. Again, a cashflow model can tell you how much you, your loved ones and business partners would need in the event of the unforeseen.

It would be wise to set aside a budget for this purpose and consult your financial adviser, who can help implement a bespoke set of insurance plans to help mitigate against these risks.

Next steps

Whilst you are reflecting on the year that has been, I ask you to first consider your plan B. After the year that we have experienced, it should be high on the financial planning agenda in 2021.

However, 2021 does provide us with some light at the end of what feels like a very long tunnel, and as you look forward to the year ahead, it also gives you the opportunity to consider your plan A – your long-term financial planning goals.

I would be delighted to support you with creating your financial plan for 2021. Please get in touch with me using the button below to arrange a free consultation.

For more information about anything in the above article, please get in touch using the button below.
James McIntyre
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