How often should I review my finances?

NOTE: This post is more than 12 months old, and the information contained within may no longer be accurate.

In my view this is not a question that people ask themselves enough. I see potential clients who come to me as they have a specific objective they want to achieve, this could be they are retiring in ‘x’ amount of years and want a certain level of income. This has then triggered them to review their financial situation.

I fully appreciate that reviewing ones pension (along with any other investments) is not at the top of the ‘to-do’ list. If you are in a pension scheme you will receive at least an annual statement from the provider which is then usually put in the drawer with the previous years!

My experience suggests that people will review their mobile phone tariff, satellite/cable/internet services and their utility provider(s) around every 2 years. However, when it comes to reviewing their financial situation and goals I would suggest this is less frequent; if at all.

I have friends who have been paying the same amount in to a pension for years and not reviewed the amount they are paying or the funds they are invested in. I know their personal circumstances have changed, as well as legislation, and therefore they are paying out of habit rather than thinking about the full picture.

Whilst this is not a bad thing, I would much rather someone is saving something for their retirement than not at all, it is important to review why you are saving and if it is a sufficient amount?

When conducting a financial review there are a number of areas that need to be considered, these include:

  • Have your personal circumstances changed? (i.e. started a family, grandchildren born) Have there been changes in legislation that could impact your financial plan?
  • Has your attitude to risk changed?
  • Has your financial situation changed? (i.e. change in income)

To highlight a couple of the above. Without a financial review you may not be aware of legislation changes which could impact your plans for retirement; whether these be good or bad! For example, the introduction of Flexi Access drawdown has had a major impact on the way benefits are taken in retirement.

Your level of tolerance to investment risk and ability to bear losses are other areas that should be regularly reviewed. Potentially, as you get older your willingness to take on investment risk may reduce as you look to protect the wealth you have accumulated. Your ability to bear financial losses, such as a sudden ‘downturn’ in the market should also be re-visited, how would you feel if your fund went down by ‘x’ percent and how would you cope?

As the saying goes, ‘there is nothing more constant than change’, when things change potentially some action needs to be taken. Achieving your goals is not just about setting up a plan, this is just the first step. In my view you should review your finances at least on an annual basis to ensure the plan you have taken time to implement remains on track.

If you would like to talk about how we can help in building your financial plan and the benefits of undertaking regular reviews please contact me

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26 Apr 2024

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