10 steps to build your financial fitness

At Canaccord Genuity Wealth Management, we believe that everyone has the right to financial independence. But ensuring your financial health over the course of your lifetime is a marathon, not a sprint.

In order to meet your goals, both short and long-term, you need to have a thorough understanding of your financial position, so that you can make the most of your money and create a comprehensive wealth plan for the future.

It’s always best to do this with professional advice. If you would like to speak to one of our Financial Planners, please get in touch.

In the meantime, we’ve collated a 10-step guide to kick-start your own understanding of your finances and to build your financial fitness.

Step one: map out your income and expenditure

You can only begin building your financial fitness if you have an understanding of your current financial situation.

Start by creating a record of your income and expenditure or update the one you already have. Does your income match your outgoings? Do you have any extra income you could put to better use in an investment portfolio? Do you have any monthly subscriptions, memberships, or other expenses that you’re not enjoying or using enough, where the money could be put to better use elsewhere? Gaining an overview of your day-to-day financial situation is a great place to start your journey towards financial security.

Step two: review any existing investments

If you have any existing investments, make sure you know exactly what you’ve got. Make a list of them, where they are invested, and how much they’re worth. Are you being charged for them? If so, how much? Could you make the holdings more tax efficient by maximising your annual investment allowance for your Individual Savings Account (ISA)? Familiarising yourself with your investments enables you to make them work better for you, and to make the most of the advantages they offer.

You may also wish to consider how your lifestyle, life stage, or attitude to risk may have changed since you originally made your investments. Being consciously aware of what level of risk you can, should, or would like to take when investing is an important part of recognising if your investments are still suitable, or require changes.

Step three: simplify your pensions

Most people start building a pension as soon as they begin work, but many don’t pay their pension pot any attention until they approach retirement. This results in missed opportunities, as pensions are a great tax-efficient savings tool that can be invested in a wide range of strategies.

Start locating those old plans now, particularly those left behind with old employers. If you don’t feel you’re receiving good value from them, or you don’t think you need the features they’re offering, you could consider consolidating them to benefit from a lower cost solution or speaking with an adviser to discuss how you might best use them tax efficiently. Ensure your pension is working for you and setting you up to achieve your long-term financial goals.

Step four: consider your family situation

If you’re married or in a civil partnership, you and your partner will want to ensure that you’re making the most of your income and capital. Shifting assets between you could lead to significant advantages in terms of both tax planning and ISA allowances. It’s also important to consider any specific financial circumstances between you and your partner: for example, ensuring long-term financial stability for the younger partner if there is an age gap between you.

If you have separated from a partner, it’s equally important to make sure that your finances are disentangled and that you are fully aware of your new financial situation. We would always suggest seeking appropriate professional advice on this matter.

Step five: assess your property

If you’re a homeowner, it’s important to think about how this fits into your financial situation. Do you have multiple properties? Have you got a mortgage? If so, are you conscious of your current interest rate, the term of your mortgage, and how long it might take to pay off? Might you one day be able to rent out a property to gain an extra income?

Having a long-term overview of the financial implications of any property you own is an important factor in ensuring your financial health.

Step six: make sure you’re protected

Nobody likes to think of the unforeseen, but it can happen. What if you were no longer able to work and provide an income for yourself and your family? Would you be able to meet the costs to live comfortably? It’s important to review your protection policies – both those held personally and with your employer. Are they still valid and up to date? Could you be over- or under-insured? Perhaps you have moved employment and a plan previously available is no longer there and needs replacing. It’s good to have contingency plans in place – just in case.

Step seven: calculate your required retirement income

Everyone wants a good lifestyle after they stop working, but not everyone knows what they will be able to afford. If you’ve interrogated your existing assets as outlined above, this can help you to form a picture of the kind of income you might have after you stop earning.

If you are still accumulating income, you can keep squirrelling away and investing the target amount of money each month to help you achieve your ideal retirement. But if you are within a few years of your retirement, you could try to estimate the income you’ll receive from your pension, savings and investments when you retire, as there may be adjustments you could make to your expenditure now to help bring you closer to the retirement lifestyle you’d like to have. Working with a financial planner using a cash flow planning tool is a helpful way to do this.

Step eight: set up your legacy

If you have a secure financial plan in place to meet your income and capital needs in the future, you may find that you have surplus funds that you would like to be distributed to loved ones and charities after your death through your Will.

Writing or updating your Will doesn’t have to be a depressing task. It’s actually a very positive personal responsibility that can offer comfort and care to your loved ones after you’re gone. It’s important to ensure that your Will accurately reflects what you wish to happen to your estate. We would always recommend seeking professional advice when drafting a Will to ensure if satisfies your requirements.

Step nine: consider gifting your wealth

If you can afford to do so, it’s possible to gift a certain amount of your money to family and friends each year without a potential inheritance tax liability. Should you wish to make gifts, it’s important to consider what allowances you have available to you, and how you can best use these to benefit your family and friends.

You may also wish to consider charitable gifting. Spending some time considering and planning what kind of support you’d like to provide now, in future, and as a legacy can help make your giving more effective and potentially bring tax relief benefits for yourself and your estate.

Step ten: plan for the future

When you train your sights on the future, you’ll almost always find that more financial fitness work can be done. Often allowances are available annually, so it can be advantageous to review your investments and finances on an annual basis. Whether it’s tidying up your pension plans, ensuring your savings are as tax efficient as possible, or considering what sorts of new investments would be suitable, a financial planner can provide valuable input.

At CGWM, our Financial Planners have the expertise and market-leading tools to help you build your financial fitness, no matter how complex your situation. Get in touch to speak with one of our Planners, and find the answers to your financial fitness queries.

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Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.

The information provided is not to be treated as specific advice. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity.

The information contained herein is based on materials and sources deemed to be reliable; however, Canaccord Genuity Wealth Management makes no representation or warranty, either express or implied, to the accuracy, completeness or reliability of this information.

The tax treatment of all investments depends upon individual circumstances and the levels and basis of taxation may change in the future. Investors should discuss their financial arrangements with their own tax adviser before investing.