In light of the news surrounding the cost-of-living crisis and inflation hikes in the last few months, you could find yourself going back to the drawing board and looking for cost-cutting solutions to make your money stretch as much as possible. For many people, that may sound like a very daunting and overwhelming task, so we’re here to give you a few tips on how to approach and organise your personal finances in terms of saving, investing, financial protection, and tax and retirement planning to help you with your financial road map. More specifically, we will discuss:

• Savings: Tips on how to start putting money aside for emergencies
• Investing: Growing your money over time by investing in assets, and its pros and cons
• Financial protection: Different ways to help shield your money, giving you and your family peace of mind when you need it most
• Tax planning: Adding flexibility to your financial planning with tax relief methods
• Retirement planning: How to prepare for retirement and generate income when you stop working

Savings

It may seem straightforward, but the general idea behind savings is to put some money aside for a rainy day. There may come a point where you need to dip into your savings for an emergency – big or small – so dedicating a suitable percentage of your income to savings can be a useful and controlled way of building up those spare funds so that, when they’re needed, your primary pot doesn’t take the hit. The amount to add to your savings each month will depend on several factors such as your net salary and bill requirements, but some financial advisors recommend 3-6 months of your expenses.  

A useful way to help you set some emergency funds aside is through a savings account, which helps you earn returns through interest on the money you deposit into the account. But the tricky part is choosing the right type of savings account for you and that will depend on things like your financial stability, your expected returns, and how quickly you’ll need to access your funds. For example, if you’re looking to withdraw cash as and when needed, you could consider easy-access savings accounts, which lets you take money out frequently, but if you’re in a position to lock money away for the long-term, a fixed-rate account could be useful for earning higher rates of return than other types of savings accounts. If you’re unsure which type is right for you, you can use a comparison site as a guide to get you started.

Investing

Unlike savings, investing focuses on putting money into an asset to make your money grow over time. It’s a common returns-generating method that has a lot to offer when it comes to organising your personal finances, particularly if you have a long-term time horizon, but short and medium-term terms are also available.

Like savings, there are many different investment strategies to explore depending on what you’re looking to achieve. The most common types are:

·       Shares: Buying company shares means that you own a percentage of that company. You can, normally, earn money from investment shares through value appreciation over time and selling at a higher price, or through dividends.

·       Bonds: There are several bond types to choose from. Typically, bonds mean that you lend money to a company, and you are paid back with pre-agreed interest. Interest payments are the most common way of generating returns from investment bonds.

·       Funds: Your investment is used collectively with other investors’ funds to purchase assets like property or shares. Dividends and interest payments are the main ways to earn returns through investment funds.

Depending on which investment type you choose, each will come with its own pros and cons, but overall, the main advantage of investing is that it can help grow your money more effectively than other methods, particularly over the long term. Also, if you consider this year’s inflation hikes, investing your money could offer greater buying power and retain value over, for example, savings accounts as inflation typically overtakes their returns.

However, investing doesn’t come without its risks. Shares, for example, don’t guarantee value growth; they can drop as well as rise. A general rule of thumb with investing is that the greater the potential rewards, the greater the risk.

Financial protection

Keeping your financial plans safe is a crucial part of staying prepared – this is where insurance comes in. Insurance is your safety net so that, should anything change along the way, your funds and your effort are protected, giving you peace of mind when you need it most. If you already have a policy in place, it’s equally important to keep it relevant to your circumstances, making sure that you always have the right type of cover.

Here are some of the key insurance types that we recommend looking into:

1. Income protection cover: This insurance type protects you from a loss of income due to an illness or accident. If you’re unwell and temporarily unable to work, income protection will pay you a portion of your monthly salary to see you through until you can return to work, which can help keep your savings protected.

2. Critical illness cover: Similar to income protection, a critical illness policy protects you when you’re too unwell to work. The main difference between the two is the way it pays you; while income protection provides a monthly income, critical illness covers tend to be a lump sum. If this is a policy you’re considering, it’s a good idea to see if this payment method agrees with your financial plans or if a regular income would be more suitable.

3. Life insurance: Life insurance could be useful if you have children or other dependents. In the unfortunate event of your death, a life insurance policy can provide your family with peace of mind and financial cover in difficult times, making sure that the mortgage and other regular fees continue to be covered.

Like any other product, it can be difficult to understand which type of cover is right for you. When putting your finances in order, you may want to review if you have any existing policies in place and if they are still relevant to your circumstances, understand the time horizon of any new policies that you’re considering, the level of cover you need with a new policy, and whether this all compliments your financial plans.

Tax Saving

Protecting your savings from tax can be an effective way of giving you more flexibility when organising your personal finances. There are many ways to earn tax relief, such as:

·       ISA accounts: A Stocks and Shares ISA, for example, offers a tax-free form of investing. You can invest up to £20,000 per tax year and your funds are protected from income and capital gains tax. You could also consider a Lifetime ISA (LISA), which can help with long-term financial planning. You can invest up to £4,000 a year in a LISA with 25% tax relief.

·       Pension: Personal pensions are one of the most effective ways to earn tax relief on your investments. For example, Self-Invested Personal Pensions (SIPPs) qualify for up to 45% tax relief depending on your circumstances. So, if you contribute £800 to your SIPP, a base rate of 20% (£200) would be added by the government and, if you’re a higher-rate taxpayer, an extra £250 (25%) on top of that.

·       Savings interest: Your Personal Savings Allowance (PSA) means you can earn tax-free interest on your savings. Depending on your tax bracket, you could earn up to £1,000 of interest.

There are many options to weigh up when it comes to tax planning. If this is something you’re not completely confident with doing independently, it’s always advised to seek some extra help and speak to a financial professional, who will be able to give personalised guidance on tax savings.

Retirement planning

Retirement is just as important as any other stage in your financial cycle and it’s a crucial part of getting your personal finances in order. Being well-prepared for this stage of your life includes growing your pension pot as well as generating income once you enter retirement.   

A good place to start your retirement planning is to get an idea of how much income you might need. An easy way to do this is to set yourself a budget. Consider your expected retirement age, determine your essential (i.e bills and food) and non-essential (i.e entertainment, holidays) spending, and this will help give you a general idea of your expected outgoings.

Once you understand you’re projected outgoings, you can start looking at income options aside from your pensions. This could be:

·       Defined benefit plan: This is a private workplace pension scheme that can provide a regular income when you retire. This can either be a monthly payment or a lump sum, depending on our plan. Your benefit amount will depend on factors like your salary and how long you worked for your company.

·       Immediate needs annuity: In exchange for a lump sum investment, an immediate needs annuity can provide regular payments to help fund your care in retirement. Payments are currently tax-free, and this annuity can provide that all-important peace of mind that your care costs are covered.

There are many other means of generating income in your retirement. This could include claiming any benefits you may be entitled to in later life, existing savings or investments, or earning revenue from assets such as rental or owned property.

Generating passive returns

Passive wealth-building methods could be suitable if you’re looking for a hands-off way of growing your money. From an investing point of view, you might consider bonds, which can offer a low-maintenance way of making your money go further. If you’re an experienced investor, bonds can also help with balancing your portfolio if they’re not an avenue you’re already invested in. A diverse portfolio can be beneficial to your financial planning as it helps spread volatility across your investments rather than a single investment bearing all the weight of potential risk, meaning that your funds and efforts to plan your finances are better protected.

At Propiteer Capital, our recession-resilient Property Bond gives you exposure to three core asset classes: trading residential assets, developing and trading branded hotels, and high-value built-to-sell developments. The Propiteer Capital Property Bond is designed to help grow your money with UK and Irish property, with up to 12% p.a. fixed-rate returns and flexible payment options.

When looking to protect your finances, you can also take advantage of the peace of mind that comes with our bond; your investment is backed by high-quality, robust assets, our processes are approved by Regulated Stock Markets and overseen by Security Trustees, and our structure means that your returns take top priority. Also, if diversifying your portfolio is one of your main financial goals, the Propiteer Capital Property Bond automatically spreads your investment across a range of geographical locations and property types, so you can easily and conveniently balance your portfolio.

To find out more about us and our bond, visit our website, or you can reach a member of our friendly customer care team at info@propiteercapitalplc.com or on 01376 319 000 if you have any questions about how Propiteer Capital can help you plan your finances.

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