woman has a business meeting

Financial health check

Laura Clark, Financial Planning Consultant
15/01/2024
woman has a business meeting
The new year is a great time to reassess where you are financially. Let’s revisit the below to see how ‘healthy’ your financial position is.

1. Spending habits

Visibility of what you are spending and on what, is critical to building your financial plan. It demonstrates your affordability and, on some occasions, where you are living beyond your means. It may surprise you how much ‘fun’ money you are spending, and this is the first step towards spending and planning more purposefully.

Most banking applications will now categorise your spending for you so you can see a history of your habits over the course of the year.

2. Do you have enough reserves in your plan?

With rising costs, and interest rates, people typically have slightly less cash in their plan than they normally would. Having the right amount of cash in your plan can be invaluable as it means you are more able to withstand the unpredictable. Typically, the ideal emergency cash balance would be six months expenditure and as a minimum six months essential expenses i.e., bills, food.

Having the right cash balance prevents you from either getting into debt by potentially dipping into that overdraft or borrowing and it stops you from having to access already invested capital which could undermine your long-term financial plan.

As per point one, it is critical you have visibility of what you are spending each month and the split between essentials and non-essentials as this will dictate your required cash balance.

3. In sickness and in health

Assessing whether you have the correct financial protection in place ensures the continuity of your plan.

Have you asked yourself what would happen to your plan if you were no longer able to work, what would happen to your family if you were no longer around? These are some of the key questions to consider when assessing whether your plan and your family are exposed to risk.

If the answer to any of the above is ‘I don’t know’ or ‘we would struggle’ you may have a need for financial protection. During a time of great emotional stress and change, the correct financial protection can be instrumental to providing some peace of mind through any turbulence. It ensures your plan, and your family will remain on track despite the worst.

Typically, financial protection plans have a period of time before they will pay out, and this can be for varying timescales which could extend up to six months. Therefore, the correct emergency cash balance feeds into making your financial plan as robust as possible.

4. Round up

The above three steps are the first to seeing how at risk your plan is. By taking these first steps, building visibility and assessing the risks within your situation you are taking strides to make your financial position more robust. Ultimately, none of us know what is around the corner and through having these conversations and a strategic plan, we can ensure you have peace of mind that through the worst you will remain financially stable.

 

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Disclaimers

The information set out in our publications is for information purposes only and does not constitute advice to undertake a particular transaction. Appropriate professional advice should be taken on specific issues before any course of action is pursued. Any advice provided by a Crowe Consultant will follow only after consideration of all aspect of our internal advice guidance.

Past performance is not a guide to future performance, nor a reliable indicator of future results or performance. The value of investments, and the income or capital entitlement which may derive from them, if any, may go down as well as up and is not guaranteed; therefore investors may not get back the amount originally invested. 

The Financial Conduct Authority does not regulate Trusts, Tax or Estate Planning. 

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