What does your financial future look like? This is not a question that many people frequently ask themselves. For many, the financial dream is to pay off the mortgage and build some savings. It’s often not until much later that they will begin to consider their pension when they feel they are old enough to be concerned about finances post-retirement.
In the coming years, the highest levels of inherited wealth will be passed on to the millennials. The previous generation (the so-called baby boomers) enjoyed the highest rise in wealth than any other generation, which was fuelled by increasing house prices, government inflationary measures and record-high employment. In 2019, the Office of National Statistics’ research indicated that one in five baby boomers were millionaires – showing substantial wealth among that generation. Furthermore, Kings Court Trust and the Centre for Economics’ research signified that an estimated £5.5 trillion will be passed onto the next generation by 2049.
What does this mean?
This is certainly not an excuse to stop saving, it’s important to remember that because of the increase in wealth, we are now all living longer than we ever have before, with the average age for women living until 88 and men at 86.
This means that many will be waiting a lot longer to receive any potential inheritance. Therefore it is imperative that you understand your own personal wealth so you can plan for your future based on the assets you have in place. Seeking professional financial advice will help you plan and understand your financial position and they can assist you in hunting down any of those forgotten pension pots you may have accumulated through employment. Input from a financial advisor will help you understand both best and worst case scenarios to allow you to plan for your future efficiently taking into consideration various factors which might be at play.
How to safeguard your financial future
Being money savvy
Wealth breeds wealth. You are three times more likely to be a homeowner yourself if your parents are homeowners. If you’re looking at buying a property, bear in mind that mortgage rates are considerably lower when you have more than a 10% deposit, so start saving to get the best interest rates.
It’s also important that if you share a home with a partner, you have suitable life cover so that if the worst happens, they won’t be left struggling financially and unable to pay the mortgage.
Make the most out of tax allowances – that is what they are there for. Every person in the UK receives a £20,000.00 annual tax-free ISA allowance and £40,000.00 annual tax-free pension contribution. Of course, for many of us, it is not possible to save a total of £60,000.00 per year but try to make as much use of those allowances as you can. Setting up a separate account where a designated percentage of your monthly earnings goes across automatically is a good habit to get into and stops you spending unnecessarily.
Understanding your inheritance
It is important to discuss wealth with your parents. This may sound morbid and it is not something that you want to think about, but it is a must. Do your parents know how much they have in their estate? Have they planned for care fees? A severance of tenancy and simple will based trust can guard against repossession in the event of a parent going into a care home after one has died. They may also need to make Lasting Powers of Attorney in case they lose capacity.
Seeking expert advice
A qualified financial advisor will be able to produce you a personal financial plan that will be monitored and adjusted annually in accordance with your changing circumstances. Your personal wealth advisor will evaluate all your liquid wealth and assets including your current bank account, savings account, ISAs, deposits, pensions, owned properties and businesses.
They will also evaluate your current cost of living, taking into consideration any potential large purchases throughout your life such as a dream car or children’s tuition fees. Through accurate financial planning, advisors will be able to provide you with crucial information you need to make financial decisions in your life now and in the future.
Stocks and shares ISAs, personal pensions and investments are all lucrative ways to secure your financial stability.
Managing your finances is not something you should be afraid of. Although money is not the be-all and end-all, it enables us to have a better quality of life. By making a few simple changes to your finances, openly talking about wealth and seeking expert, financial advice can make your financial future a happy, prosperous one.
To discuss your financial ambitions, contact us today.