Lucky number eightPosted on: 20 August 2013 by Andrew Stallard
50connect finance expert Andrew Stallard steps up with eight tips to help you secure wealth and prosperity.
The Chinese have long considered the number eight lucky, possibly because the word sounds similar to the words for prosper, wealth or fortune. So we thought it might be appropriate to share our lucky eight wealth tips.
- Planning - the most important tip. Have a plan. Most people who fail to achieve their financial goals don’t fail because their plan didn’t work but rather the total absence of one! Review your financial plan at least once a year. Are you still on track? Is your plan still realistic? Do you need to change your investments or your contributions?
- Pensions - the Government has indicated with the new flat rate pension that if you want more than the most basic retirement income you will need to provide it yourself. With greatly increased life expectancy, for those not lucky enough to enjoy a final salary pension scheme, saving for an income in retirement should have a prominent place in any financial plan. If possible join a work place scheme and receive an employer’s contribution and money from the government in the form of tax relief. Consider starting a pension for your children: even as non tax payers they can see their pension pot boosted by £720 each year care of HMRC.
- Over concentration. Don’t put all your eggs in one basket. Exposing all your wealth to one type of risk can see dramatic declines. Putting all your money into property or tech stocks as history has shown can be similarly dangerous. When advising clients on their investments we recommend a well diversified portfolio to all our clients at whatever level of risk they are happy to take.
- The opposite of this can also present a danger- over diversification. Clients who have built up large number of investments over many years may end with portfolios that are difficult to manage and measure in terms of risk. A Wrap platform can help draw together different investments and make it easier to form a coherent plan.
- Too little risk. The ever present danger to our money is inflation, eating into the buying power of our money year by year. We believe that when investing for the long term it is vital to take some risk to achieve inflation beating returns. A good adviser should be able to measure the level of risk in your investments and match it to your appetite. However for money required in the short term it is vital to maintain an emergency fund of at least 6 months salary in a bank ,building society or NSI account.
- Paying too much in charges. The returns on your investments will depend on the investment performance but also importantly on the level of charges you pay. Many old pension contracts have large ongoing charges and switching to a modern lower cost pension can save thousands providing a larger income in retirement. Purchasing investments via a platform or Wrap can mean investments are bought at wholesale rather than retail prices and ongoing charges are also reduced.
- Don’t pay too much tax . When saving for retirement there is sometimes an argument about whether pensions or ISAs provide the best route. Our advice is that although the tax treatment is different, if possible to maintain flexibility use both, as near tax free growth can be achieved in either tax wrapper.
- Research - The difference in performance between investments taking a similar amount of risk can be staggering. It is vital to research your investments. If you haven’t got the time to do this yourself find a financial adviser with access to comprehensive research process.
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