Have you got any savings in place? If your answer is, ‘after I’ve paid out for everything, I have nothing to save’, then read on.
Saving is wise because nobody can predict the future. Saving money will help you to become financially secure and provide you with a safety net, in case of an emergency.
Saving money for the future is one of the great habits of wealthy people — the rich are getting richer because of the way they look at spending and saving money. They have the successful habit of being able to control their expenditure in order to grow their wealth. To achieve your financial goals, the most important step is to take control of your spending and make sure you are taking the first step, which is to save.
Instead of spending throughout the month and saving what remains, recalibrate your outlook by putting an amount away first and then spending from what is left. This little change makes a big difference.
The first thing to do when talking about savings and investments is to understand what is actually meant by ‘savings and investments’. It can be broken down into two topics — ‘no or low risk Savings’ and ‘risk-based investments’. If you are a generally cautious person you may find that investing your money is a scary thought and the idea of taking a risk is unattractive — ‘no or low risk savings’ defines this. There is very little or no risk to your capital, and what you save you get back with some interest. The low risk is inflation, if inflation is higher than the interest paid, then the value of your money will go down.
No or low risk investing can include bank or building society deposit accounts, cash ISAs and National Savings Premium Bonds. These types of accounts are suitable emergency funds and good for short-to-medium-term savers.
In contrast, risk-based investments are normally held for a minimum period of 5 years (making them suitable for retirement planning) but carry a risk that the capital invested can go down as well up in value. The areas or ‘asset classes’ are wide and varied, and carry different levels of risk. Examples of risk-based investments could be a stocks & shares ISA, pension plans, unit trusts and investment bonds which is where many people join together and invest in funds run by a fund manager, who in turn invests in various ‘asset classes’.
Is it risky to pick your own stocks?
Ultimately, yes, it can be risky putting your your money into an investment that doesn’t match up to your proper risk level, meaning you could be finding yourself taking more or less risk then you wanted.
Is it important to be financially diverse. Why?
The old adage, ‘don’t put all your eggs in one basket’ is absolutely true. By spreading your investments into different areas and asset classes, it provides a safer diverse portfolio.
How often should I check my portfolio?
You can review your investments as often as you desire, but we recommend that a review is undertaken once a year. Biannual reviews are also available.
Can I plan for more than just my retirement?
Absolutely. Having a plan for your savings and investments is the first thing you should decide. Start with an emergency or ‘rainy day’ fund, then short and medium-term savings come naturally, followed by investments.
How easy is it to start investing?
Starting to invest is easy but the process is not simple can be complicated if you have little or no investment experience. You should take advice from a FCA-registered financial adviser who will help you to understand the process.
I don’t have a lot of money, is investing only for the rich?
No. Investing is for those who understand that long-term financial planning is important and that the value of investments can down as well as up.
How much money can I invest at once?
You can invest everything you have saved if you wish, but that wouldn’t be sensible. This is where our independent financial advisors play the important role of determining what you can afford to invest.
Will I be paying tax on my investments?
This is dependent on your personal situation and the product(s) you invest in, there can often be no tax liability due on your investment. Our independent financial advisers work in harmony with accountants within LR Accounting to ensure your tax liability is minimised and to properly assess what effect your investing will have on your personal tax situation.
Could I have joint investments with my spouse?
Yes, many investments allow joint investments to be held and, in certain cases, it is prudent and tax-efficient to do so.
Can I gift my investments to another person without cashing in the investment in?
You can assign your investment to another person, but they would then have full control of the investment. To ultimately keep control of the investment until the right time, a Trust can be used.
Would I have to pay tax on a gifted investment?
Inheritance tax may be due within the first 7 years of the gift be made (or longer if a gift has been made previously), with the tax tapering down as the 7 year period ticks on.
What can I do if I feel my investments are starting to get too risky for my liking?
By regularly reviewing your investments with an independent financial adviser, you can change the areas and funds in which you are investing and reduce the risk you are taking within your investments.
Can I insure my investments in case the market drops significantly?
Some types of investments offer protection, but these investments are complicated and are not for the majority of investors. If this is something that you want to know more about, please mention it with our independent financial adviser.
LR Connections provides expert independent financial advice, accountancy and estate planning services
