Top 5 Financial Planning Tips

Read on for our top 5 financial planning tips to help you take control of your finances more effectively and get your money working for you.


We are living in uncertain economic times and the cost of living continues to put pressure on businesses and households. Food, utilities, fuel – we are all feeling the pinch, and with mortgage rates now close to 6% [1], uncertainty and concern is widespread. With much out of our control, there are still certain things that you can do to better manage your finances.




Top Tip No. 1 – Learn to budget to understand your habits


First and foremost, we advocate that all clients spend some time analysing their income and expenditure. Completing a budget allows you to know what income you have coming in, after tax, and, more importantly, what is going out. Writing this down or using Excel can allow you to track your spending to get an idea of how your outgoings fluctuate over time.


One top tip is to breakdown your outgoings to what is ‘core’, such as heating, food, mortgage repayments, rent etc., what is ‘essential’, such as broadband, travel etc., and what is ‘discretionary’, such as going out, takeaways and holidays. This exercise will allow you to identify what has to be paid and what could potentially be reduced if you are finding that your income is being squeezed.


This can also identify if there is any surplus income that can be used to clear any outstanding debt, add to savings or even invested for the future. 


Furthermore, completing a budget allows us to understand what your expenditure needs are and how your assets / pensions can be used to fund future retirement planning, where applicable, with this typically done via cashflow planning scenarios.


Top Tip No. 2 – Future proof your assets to protect your wealth


When looking at your finances, it is important to consider how well protected you are. We still come across cases where clients have large mortgages but no life insurance in place, despite this being relatively low-cost. Our tip, therefore, is to look at both your liabilities and income needs (refer to Tip #1 for more information on this), and then also review how well you would be protected if anything were to happen to you. 


In terms of what is available, we have listed some of the key protections below:


Mortgage Cover

Mortgage cover would provide peace of mind, in the event you passed away, the outstanding mortgage liability would be cleared. For young families, this is essential; otherwise, the surviving parent may have to downsize during what would be an extremely difficult period. Critical illness cover can also be included, with a lump sum paid out in the event you were diagnosed with a severe illness (such as Parkinson’s) or had a stroke/ heart attack. 


Income Protection

Many overlook that one of our largest “assets” is in fact our income. Statutory Sick Pay is only payable for up to 28 weeks at £99.35 per week.[2] This is unlikely to cover all your bills and may result in you using your savings / investments, or even getting into debt. With Income Protection cover, this can cover up to 60% of your gross income if you were unable to work due to an accident or illness. Typically, the benefit is paid monthly after a deferred period, with this payable until you return to work, the plan term ends, or in the event of death. This is useful for both mortgage owners and renters.


Writing a Will

Another tip is to also consider writing a Will and making a Lasting Power of Attorney. A Will ensures that your wishes are met, and no intended beneficiaries are ‘disinherited’, whilst a Lasting Power of Attorney allows your chosen loved ones / friends to manage your affairs if you are alive but cannot make decisions on your own behalf.




Top Tip No. 3 – Be smart with your investments


In 2019 to 2020, just under £50 billion of that subscribed into ISAs (£75 billion total) was placed into Cash ISAs [3]. From a savings point of view, it is clear that cash remains ‘king’ for most. Whilst we completely agree that everyone should have an ‘emergency fund’ to pay for those unforeseen bills (typically in the region of 6-9 months of monthly outgoings), inflation can cause the real value of cash savings to fall over the long-term. 


Therefore, investing surplus income / cash savings over the long-term can be one option to try and preserve the real value of your capital, or even potentially grow your invested capital over the long-term. This may be of real importance if you are considering growing your ‘retirement pot’ to retire early, or if you have key milestones that you want to achieve (such as paying for your dream wedding or holiday). 


From a corporate viewpoint, many companies have large cash reserves which are earning very little in interest. Investing surplus cash, to make it work harder for the business, is an option that may want to be considered, although tax advice would need to be sought first.


How the capital is invested really depends on how much risk you feel comfortable taking, how much you could afford to lose without impacting your current standard of living, as well as your previous experience and your investment time horizon. 


Here at MHA Caves Wealth, we take all the above into consideration before recommending how to appropriately construct a suitable portfolio. 




Top Tip No. 4 – Assess your risks and review your investments

You may have existing investments that you contribute to or use a service where you pick a level of risk, and the provider does the rest. Either way, it’s important to ensure that these investments are right for you, as those picked at outset might not be suitable for your current personal circumstances or objectives.  

Different investments also have different charges, though cheap isn’t always best. It is prudent to review charges, as well as how investments work and how they have performed against peers and a Financial Adviser can help with this analysis and recommend appropriate strategies. 

While everybody wants their investments to grow to help achieve their goals, this does come with an associated risk, as investments can go up as well as down. For investors with shorter term financial requirements, or to generate an income, it is likely they may have a low tolerance for risk. Those investing for the longer term may be more tolerant of portfolio fluctuations, though that’s not to say that everyone will be comfortable with it.

A Financial Adviser will make sure that investments are held at a level of risk you are comfortable with, spread in a variety of different asset classes (such as equities, fixed interest, commercial property and alternative assets), as well as geographically, which perform differently in different economic environments, with the aim to reduce extreme movements in the value of portfolios.



Top Tip No. 5 – Grow your savings with tax allowances

Each tax year everyone has several useful allowances which can be used to help increase investment and savings growth in the future, whilst doing so in a tax efficient manner meaning that the overall capital is not as affected by tax. Below are just some of the allowances which we deal with for clients on a day-to-day basis. Utilising these can help towards achieving your financial goals, with the potential to provide a tax efficient income later in life.


ISA Allowance

Each person has an annual allowance for savings or investment into an ISA, which at present is £20,000 per person. ISAs are tax efficient in that the investments or savings within them are not subject to income or capital gains tax, meaning not only are they tax efficient during the accumulation phase of life, but also when withdrawals are required as again there would be no tax payable at this point. This can therefore help to build in a tax efficient income stream in retirement, alongside other incomes such as the state pension, any personal pension income or rental income which they might receive.


Annual Pension Allowance

We also advise clients on maximising the amounts that they can pay into a pension each year, both from an affordability viewpoint and to ensure that they do not incur any annual allowance tax charges from potentially over funding their pensions. By making a personal contribution into a pension, basic rate tax relief will be added to the contribution within the pension, with higher and additional rate taxpayers being able to reclaim further tax relief through their self-assessment or tax returns. This can make pensions a very tax efficient way of saving towards retirement, or to ultimately pass wealth onto future generations if an income is not required. This is because a personal pension pot would not typically be deemed within your estate for inheritance tax purposes (although there are a couple of exceptions). By maximising the amount which can be paid into a pension, this will ultimately help with growing the size of the pension, which can then be used to provide a potentially greater or more sustainable level of income in the future.



Contact us for more information

If you would like to discuss any of the above points further, please do not hesitate to contact our Head Office on 01604 621421 to speak to one of the financial advisers.



Risk Warnings

MHA Caves Wealth is authorised and regulated by the Financial Conduct Authority (FCA), Financial Services Register number 143715.

This communication is for general information only and is not intended to be individual investment advice, recommendation, tax or legal advice. The views expressed in this article are those of MHA Caves Wealth or its staff and should not be considered as advice or a recommendation to buy, sell or hold a particular investment or product. In particular, the information provided will not address your personal circumstances, objectives, and attitude towards risk.  Therefore, you are recommended to seek professional regulated advice before taking any action.

Key Risks: Capital at risk. Past performance is not a guide to future performance. The value of an investment and the income generated from it can go down as well as up, and is not guaranteed, therefore you may not get back the amount originally invested.

Investment markets and conditions can change rapidly. Investments should always be considered long term.

Tax and Estate Planning Services (including Trusts, Wills & Lasting Powers of Attorney) are not regulated by the Financial Conduct Authority.

This Information represents our understanding of current law and HM Revenue & Customs practice as at 6th October 2022. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. You are recommended to seek professional regulated advice before taking any action.