The start of a new year is the perfect time to give yourself a quick financial health check.
Here are five simple steps you can take now to put yourself on the right footing for 2021 and beyond, setting you up for a healthier financial future.
1. Make a will and set up a Power of Attorney
Making a will is an essential financial exercise.
If you die without one in place, it can cause immense stress and financial hardship for your family. In a worst-case scenario, your loved ones could find themselves not inheriting anything, and becoming embroiled in bitter legal disputes.
If you have assets in more than one country, you may want to consider having a separate will for each jurisdiction.
By making a will, you can ensure:
- Your money and other assets end up where you want them to
- Your children are properly cared for
- Your unmarried partner and stepchildren are provided for
- Your family can continue living in their home.
Having a will in place also means that your estate does not attract unnecessary Inheritance Tax. You will also have peace of mind, knowing that your family will be protected long after you’ve gone.
Whilst your will ensures that your assets are allocated in accordance with your wishes on death, a Lasting Power of Attorney (LPA) will make sure your finances are dealt with in accordance with your wishes whilst you are still alive, but unable to manage your own affairs.
If you already have an LPA in place, it’s worth quickly checking that you are still happy with how it is written and any stipulations you made at the time it was originally drawn up.
If you do not currently have a will or an LPA in place, we can advise you on the best way of arranging both.
2. Start your 2021 tax planning
For many of our clients, declaring UK property income is a key reason to submit a UK tax return.
The deadline to submit your UK 2019/20 tax year self-assessment is at the end of January. If you haven’t started sorting it out yet, it’s well worth making sure you’ve got everything you need to hand for when you do. There is nothing worse than digging through your paperwork on 31 January for a particular form or statement!
Doing it well before the deadline also gives you time to sort out any outstanding tax payable.
Looking further ahead, it’s also worth starting to plan for the 2021/22 tax year, especially if you’re moving to the UK from Hong Kong or elsewhere. There are several tax planning issues that you should be looking to address before the end of the current tax year so that, from a financial point of view, your move is as smooth as possible.
Some of the things to think about include:
- Establishing your domicile position
- Reviewing your existing investments
- Making use of your spousal/civil partner allowances.
You will find our previous article – 10 considerations for pre-UK residency planning – useful.
3. Cashflow planning and forecasting
You can help get your finances in order by setting up a spreadsheet detailing your monthly income and outgoings.
The quickest way to do this is to go through recent bank statements and note down all regular outgoings, as well as other regular payments taken via your debit card.
This will give you a clear idea of your disposable income after the deduction of all regular outgoings and will also flag up any discrepancies that you need to investigate, such as incorrect amounts being collected, and direct debits that can be cancelled.
It will also help when it comes to scenario planning. This can help support your financial decision making by ‘war gaming’ certain assumptions about future financial events and checking that you are in the best possible situation to cope with any big changes.
4. Clear your debts
The new year could be a great time to start putting a plan together to deal with any outstanding debt.
The higher the interest rate, the more the debt will cost you, so it’s usually a good idea to pay off expensive loan and credit card debts first. Unless you’re disciplined enough to pay it off in full each month, credit card debt can mount up very quickly, especially if you just pay the minimum monthly required amount.
Paying off your debts could enable you to save more money for your future and reduce any anxieties you’re feeling about your finances.
Some personal loans come with high early repayment penalties, so make sure you read the terms and conditions before paying them off.
5. Check you have not been ripped off
In our article about financial rip-offs, we outline two common ways unscrupulous salespeople look to take advantage of clients by persuading them to put their money in investment products with extremely high charges.
Internationally mobile expats in places like Hong Kong are a particular target for this kind of exploitation, as the financial regulatory regime is far laxer than it is in the UK. So, such rip-offs are easier to set up and less easy for the unwitting client to identify.
We would therefore strongly recommend that you check through your pension and investment arrangements and see if there is anything on any of the documentation that looks untoward. Our article gives you an idea of the sort of things to look for.
If you’re in any doubt whatsoever, please get in touch with us. We’ve got plenty of experience in both identifying rip-offs and helping clients extricate themselves from them. We can also then help put together a new investment portfolio.
Get in touch
If you want advice on any of the issues we’ve flagged up here please get in touch. You can contact us by email or if you prefer to speak to us, you can reach us in the UK on +44 (0) 208 0044900 or in Hong Kong on +852 39039004.