Having financial goals is a useful way to remind yourself of what you want to achieve in life and gives you a reason to take control of your finances. Your financial goals should be tailored to your own personal circumstances, which can obviously change over time, as life is never a straight line.

Increasing your net worth is often the first thing that comes to mind because this gives you more financial freedom and largely dictates the lifestyle you are able to live now and in the future. Your financial position will be affected by various inflows and outflows, some of which are likely to be linked to your financial goals e.g. increasing your income or paying off a mortgage. Cashflow planning can be a useful way to demonstrate how various scenarios can impact your finances and thereby help you establish meaningful and achievable financial goals both in the short-term and long-term.

A good starting point for everyone is to ensure you have a suitable emergency fund to cover unforeseen circumstances. These are funds that are easily accessible and can typically cover at least 3-6 months’ worth of current expenditure. Once this is sorted, there can be a more concerted effort towards growing your other assets. Bear in mind, you may need to ring-fence some funds for future care costs, considering the ongoing UK social care reforms.

As part of your goal-setting I think there are a few small financial changes that people can make in order to improve their monetary wellbeing in 2023.

First of all, I would suggest checking your state pension forecast to see if you are on track to receive the full state pension – you can easily do this online through the government website. Importantly, until the end of this tax year in April 2023 you can top up your state pension entitlement by buying national insurance years back to 2006. This is due to transitional arrangements put in place when the new state pension was introduced in 2016. However after April 2023, you can only go back 6 years. A voluntary national insurance year costs around £800 and it adds £275 a year to your state pension so the breakeven point is roughly 3 years. Everyone age 45-70 should be checking if they have any gap in their years, whether you should go forward and buy them is a more complex question.

If you are already in receipt of your state pension, and suspect you are being underpaid, you should check this with the Pension Service. This is not uncommon and has widely been reported on in the news.

I always advise clients to create a financial spreadsheet so they know what the current financial position is and, importantly, update it periodically. This does not have to be anything too fancy and it can help plan towards any financial goals.

Of course, the most important aspect of financial planning, is having a will in place. A will is a legal document in which you declare what you wish to happen to your estate on death. If you die without a will, your estate is distributed according to the rules of intestacy, irrespective of what your intentions actually were and may mean your estate is not divided as you expect or want. Making a will is especially important if you’ve been divorced and have children from multiple marriages.

If your will is invalid, your estate will be treated as if you had made no will hence why it is a good idea to get a solicitor to draw up your will, especially if your situation is complicated as they can guide you through the process for a modest fee. If your situation is relatively simple then you may be able to get a will written or updated free of charge by a participating solicitor as part of Free Wills Month which takes place in March and October every year. Remember you should consider updating your will whenever your personal circumstances change.

A Lasting Power of Attorney (LPA) should go hand in hand with a will. A will protects your beneficiaries' interests after you've died, but a LPA protects your own interests whilst you're still alive, so could arguably be seen as more important depending on your point of view. The moment you die, the LPA ceases and your will becomes relevant instead.

A LPA allows you to delegate control of your finances to your chosen attorney(s) in the event that you lose mental capacity but can sometimes be invoked beforehand depending on your personal circumstances. Your attorney(s) have to act on your behalf and in your best interests. It’s important to note that a LPA has to be registered whilst the donor has mental capacity and is over the age of 18. There are two types of LPA: health and welfare, and property and financial affairs. Often people have both but ultimately the choice is yours.

Older types of power of attorney exist. A General power of attorney covers your financial affairs and is suitable for a temporarily period of time. An Enduring power of attorney covers your property and financial affairs. EPAs were replaced by LPAs in 2007. EPAs registered before then remain valid however changes cannot be made to an existing EPA – this has to be cancelled and a LPA set up instead.

Uday Tuladhar, Paraplannner, JM Finn 

The information provided in this article is of a general nature. It is not a substitute for specific advice with regard to your own circumstances.

The value of securities and their income can fall as well as rise. Past performance should not be seen as an indication of future results. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities.


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