Why regular financial reviews are essential for achieving your long-term goals

Category: News

Assuming your financial plan is a once-and-done job is a bit like planning an ambitious mountain hike without factoring in potential changes in the weather, injury, or obstacles in your path.

Indeed, effective financial planning is an ongoing process that aligns your goals with your current circumstances and aspirations – and these can change over time, or in response to certain life events, such as getting married, having a child, or receiving a salary increase.

So, if you fail to review your plan regularly, you could be working towards goals that you no longer aspire to, or your strategy might not be the most effective approach anymore.

And yet, if it’s been a while since you reviewed your finances, you’re not alone. According to Legal & General, over 24 million adults in the UK are financially “disengaged”, either because they feel secure enough not to keep such a close eye on their money (20%), or because their busy lives mean they have other priorities (18%).

If this sounds familiar, read on to discover why reviewing your finances regularly, or when your circumstances change, is essential for helping you achieve your long-term goals.

Your circumstances and priorities may alter

There’s no one-size-fits-all approach to financial planning. A plan that’s meaningful and motivating for you in the long term needs to be tailored to your specific circumstances and goals – both of which could change over time.

For example, you might decide to bring forward your retirement date. This could mean that you need to increase your pension contributions or rebalance your investment portfolio to ensure that you have enough funds to last for a lengthy retirement.

Alternatively, your finances might be unexpectedly boosted by an inheritance or a pay rise, which your current financial plan doesn’t account for. You may want to adapt your savings and investment strategy to factor in a higher disposable income.

Reviewing your financial plan when your circumstances or priorities change could help you stay on track for achieving your goals, or maybe even exceed them.

Read more: Had a pay rise? 3 sensible ways to make the most of your money

Your aspirations may change

Goal-setting is at the heart of effective financial planning. Aligning your short-, medium-, and long-term financial goals with your broader objectives in life could help you get to where you want to be.

Indeed, having clear and meaningful goals could help you:

  • Stay motivated to keep your financial plan on track
  • Monitor your progress
  • Identify opportunities for improving your strategy
  • Create achievable action plans
  • Make better financial decisions.

However, it’s likely that your aspirations have changed over time – are your goals now the same as they were 10 years ago?

If the answer is no, your financial plan might need adjusting.

A financial planner can provide invaluable support by taking an objective view of your finances, listening to how you want your life to look, and then updating your plan to help you achieve this.

Political and economic factors may affect your plan

Your personal circumstances are the foundation of your financial plan, but external factors – such as the current economic climate – have a role to play too.

Consider the effect of higher-than-average inflation and interest rates on UK savers, since 2021. According to This is Money, savers lost twice as much to inflation in 2023 as they earned in interest.

Indeed, your finances could be affected by several factors outside your control, including geopolitical events such as the war in Ukraine and government changes to tax allowances.

What’s more, upcoming elections in the UK and the US this year could potentially affect the performance of your investments.

Fortunately, by regularly reviewing your financial plan, you could mitigate such political and economic factors, and stay on track to achieve your goals.

Keep your finances as tax-efficient as possible

Making the most of your annual tax allowances and exemptions is key to keeping your finances as tax-efficient as possible.

However, tax rules may change from time to time. For example, the government reduced the Dividend Allowance from £1,000 to £500 and cut the Capital Gains Tax Annual Exempt Amount from £6,000 to £3,000, on 6 April 2024. Any investment returns and gains you make from disposing of assets that exceed these allowances may be taxable.

It’s possible that these changes – and others  – passed you by. Indeed, keeping up to date with complicated tax rules might feel overwhelming. So, working with a financial planner could ensure that you stay abreast of current tax allowances and exemptions, and don’t get caught out unexpectedly.

Read more: 650,000 more pensioners could pay Income Tax this year: Discover 4 ways to reduce your tax bill in retirement

Review the performance of your savings and investments

Your investments are likely to fluctuate over time. While this is inevitable and adopting a long-term view of investing could help you ride out the highs and lows, it’s important to periodically check that your portfolio aligns with your long-term goals.

For example, when you were younger, you might have been happier taking on a higher level of investment risk than you feel comfortable with once you’ve had children.

Additionally, it’s often worth shopping around for the best savings rate, especially when interest rates are relatively high, as they have been over the past 18 months.

A financial planner can work with you to explore and assess your options. They can also use cashflow modelling to help you review your financial plan and ensure that it aligns with your current goals.

Get in touch

If you’d like to learn more about how a financial review could keep you on track to achieve your long-term goals, please contact us by email at info@lloydosullivan.co.uk or call 020 8941 9779 to see how we can help you.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.