Editorial Team
AUTHOR Editorial Team| CREATED 20 Jan 2016

Health-check your finances: what to do before making big plans

You can’t aim for a particular destination until you’ve worked out where you are. So take some time to get a clear picture of your current financial situation. Taking a snapshot of your finances is essential before you start making big plans about your future. It may take a few hours, but it’ll save you much more time over the long run.

Having a clear picture of your finances is also a good idea prior to seeking financial advice, to help you make the most of the time you spend with an adviser. And they can help you keep your plans on track as your circumstances change over time.

What’s holding you back and what’s pushing you forward?

Putting money into savings and investments can help you reach your financial goals more quickly, whereas taking on debt or spending more than you’re earning will slow you down. This is why it can be a good idea to clear all of your debts before you start trying to save and/or invest in pursuit of a long term goal (with the possible exception of loans that have very good rates of interest, or very good terms, such as a UK Student Loan).

How much do you owe in total on your mortgage, personal loans, credit cards or other debt? What rates of interest are you paying, and how much do these arrangements cost you each month? Could you change them without incurring penalties that would wipe out the potential savings?

How much do you have saved in cash, investments, property and pensions? Could you move your money to accounts that pay higher rates of interest or are more tax-efficient? What about your investments – how much have they grown? And don’t forget pension savings as well: what income does the size of fund predict to give you on retirement?

Identify cost-cutting opportunities

For each source of regular expenditure ask yourself: ‘Am I paying too much?’ Start with your insurances – home, car, life, pet, medical, appliances, travel, car breakdown, and gadget. The list can be endless and cost hundreds each month. If your circumstances have changed then you may no longer need certain products, so can you get the cost down?

The cost of life cover has fallen sharply in recent years so you may be able to get the same level of coverage for much less, even though you’re now a few years older.

Conversely the cost of medical insurance – both private medical insurance and critical illness cover – has been rising rapidly, which makes reviewing policies important. Can you switch providers for a better deal? (Be wary if you have a pre-existing condition though, as a new provider may exclude it from cover.)

Get a professional opinion

To give your finances the best possible check-up, you should consider seeing a financial adviser. They’ll ask you many of the questions raised above, and can help you get a grip on your finances so that you give yourself the best possible chance of achieving your life goals. They can also keep an eye on things so that you’re always clear about what state your finances are in and what you might need to adjust to stay on the right track.


Editorial Team

Old Mutual Wealth Expert in Finance, Protection, Investments, Pensions