If you have made, or are about to make, your New Year’s resolutions, one of the first, and a vital one, should be to make a full review of your financial situation. 2008 has been an incredibly difficult year as far as finances are concerned. Governments worldwide have struggled to ease the financial position in previously untested ways. While the credit crunch has raised some specific issues (see ‘Boxed in by the Credit Crisis?’), taking a general overview of your financial planning could highlight some important questions.
Investments
If you have deposit investments, are they properly protected? The Financial Services Compensation Scheme now protects up to £50,000 of an investment in a specific bank (see ‘Financial Services Compensation – What’s Covered?’). Do you have more than that at risk in an institution? Should you spread these investments? What about the stockmarket? It has been extremely volatile during 2008. How have your equity-based investments been doing? It may be time to look at these to see if your portfolio is balanced properly.
Protection
The financial situation over the last few months has adversely affected the wealth of many families and you may wish to look at the different ways of protecting your family for the future. Do you have enough life cover to protect your spouse or partner as well as your children or grandchildren? Again, professional advice is important to ensure that such life cover is set up in the correct way.
Pensions
One major area to suffer from the decline in stockmarket values is pension funds. Most of these have some equity exposure. If you are already retired and drawing on your funds or you are rapidly approaching retirement, you really owe it to yourself to conduct a full review of how your pension fund is performing. You do not want to suffer a drastic reduction in pension just when you find that you need to maintain your income. You may wish to think about switching your pension funds to more ‘safe’ investments as retirement approaches. Pensions are complex. They combine government rules on limits regarding tax-efficient investments and the tax reliefs available with actual investment decisions. Professional advice is vital before taking any strategic decisions. An overall financial review at this time could put you into a much better financial position in 2009.
