Get your money matters in good shape

"Never" was the response of one in 10 people who were asked when they will be able to retire, according to a YouGov survey for Financial Planning Week. That's why, unlike its rivals National Chip Week, National Bed Month and World Goth Day, Financial Planning Week, which began yesterday, may actually be worth noticing.

It's run by the Institute of Financial Planning, but sorting out your savings, pension and life insurance plus dealing with debt and budgeting doesn't have to involve paying for advice. The first step is to set out a strategy for debt, savings, pension, investments and life cover. Here, independent financial advisers explain how to do just that.

Investments

"Don't invest unless you have repaid expensive debts, are adequately insured, starting to repay your mortgage and have built up a cash reserve equal to at least six months' living costs," says Jason Butler, IFA at Bloomsbury Financial Planning. For those ready to invest, he suggests considering an index tracker, which apes the stock market. "The Vanguard LifeStrategy range provides a range of multi-asset-class exposures which are constantly rebalanced within one fund, for a total annual expense cost of 0.31%."

Consider investing monthly to ensure you'll sometimes buy high, sometimes low. "With equity markets very volatile, this could be a solution for people looking to invest now but concerned about market timing," Butler adds.

Focus on your investment goal, not daily market activity. Adrian Lowcock, IFA at BestInvest, warns: "Investors too frequently get caught out by short-term uncertainty and volatility and ultimately selling low and buying once markets have recovered. Short-term investing is better left to the professional traders who have all the time to do that. Ignore the noise and make investment decisions which will perform over the timescales you are looking to invest for."

Savings

Create a saving plan with monthly targets and use tax-efficient vehicles like an ISA, which has an allowance of £10,680 for stock and shares investment, and half that for cash savings per person each tax year. "Don't confuse saving with investing," says Butler. "Savings are required for short-term needs, and where you can't afford to risk your capital. Don't be fooled by monthly savings accounts with high rates, as they are usually no higher than lump-sum accounts when you
take into account the fact that interest is not earned evenly throughout the term."

As long as you do not put more than £85,000 with one banking group (or £170,000 jointly), your nest egg will be covered by the Financial Services Compensation Scheme should the bank go bust.

Retirement

If your employer offers a pension scheme that has free or matching contributions, then join it. You can also save into a pension for a non-earning spouse and still benefit from tax relief. "The maximum which can be invested a year is £2880, and then the Government adds £720, making a total of £3600," explains Danny Cox at Hargreaves Lansdowne. "Saving for a spouse in this way is one of the most tax-efficient ways to save."

Delay pension contributions if you expect your earnings to rise soon, as the 40% tax rate starts at income of £42,475. So, explains IFA Jason Witcombe at Evolve Financial Planning, "if your income is £40,000 and you pay £1000 into your pension, it will cost you £800 after basic-rate tax relief. However, if you are earning £45,000, that same contribution would only cost £600 after 40% tax relief.

"The same theory goes with other important tax thresholds at £100,000 and £150,000 of income. Irrespective of income, you should still make best use of any employer pension contributions though."

For those in or approaching retirement, think twice about deferring an annuity. "Rates may be low," says IFA Mel Kenny at Radcliffe & Newlands but, he pessimistically adds: "You may not live long enough to recoup the income forgone."

Life insurance

"If you are working, then income protection is arguably more important than health insurance if you have to make a choice, because even the worst NHS care will treat life-threatening illnesses quickly," says Butler. "If you lose your income due to a prolonged but not necessarily serious illness, it could wipe you out financially."

Cox at Hargreaves Lansdowne adds: "Life insurance is much cheaper than you think; review your cover every year."

Financial Fitness

* Identify your goals: how much do you need to retire, when, what are your big spending plans, etc.

* Know what you are worth: what assets do you own, how are they held (solo, in joint names or in the name of the lower-rate taxpayer?), what's your net
worth? Set specific targets and timescales to increase it in line with your life goals.

* Debts: work out a debt management plan to pay off debt, tackling high-interest borrowings first.

* Stash some cash: build up a "cash cushion" of at least two to three months' net income to help cover emergencies.

www.financialplanningweek.org.uk