Don’t put off the chance to spring clean your finances

With the new financial year still in its infancy, now is the perfect time to pause and reassess your personal finances.

It’s one of those tasks you’ve probably been putting off, especially amid the surge in the cost of living.

It can be a daunting chore but it is absolutely crucial.

Life changes, so it’s vital to consider whether the financial plans you made even just a couple of years ago, are still relevant.

This time of year is perfect for revisiting your goals and thinking about your long-term objectives.

So, comb through your bank statements, pinpoint where your money is going and identify where savings can be made.

If you find yourself with surplus income, it’s beneficial to consider how much could go towards your savings goals each month and where the extra cash should be deposited.

For the 2024-2025 tax year, which started on April 6, individual savings account (Isa) allowances have been reset at £20,000.

But the annual allowance for pensions has remained at £60,000.

I’d encourage anyone to commit to saving a set amount each month.

Before you know it, it will become a habit which will set you on track to making the most of your Isa allowance.

April also ushered in new pension and tax allowances.

While the personal tax allowance didn’t go up in the Spring Budget, the income limit for married couple’s allowance was increased from £34,600 to £37,000.

In addition to these changes, lifetime allowance has been abolished.

This is one of the key thresholds governing how much you can pay into your pension. Previously, this was subject to a lifetime allowance charge.

That it is no longer in existence, so you can benefit from saving as much as you want into a pension without incurring a tax charge.

For high earners in particular, planning early on in a new financial year is optimal.

This should take into consideration any career moves, salary changes or bonuses.

It’s a common theme that those on higher incomes budget and plan for their monthly outgoings but don’t always plan for the future.

As tempting as it is to spend every penny of your disposable income, I always advise clients to get into a good habit of saving as much as they can every month to make the most of tax allowances.

The same goes for bonuses. When you know that lump sum is on its way, think about setting cash aside for an emergency fund for any unexpected expenses.

Also consider whether you can allocate extra cash to your Isa or pension pot.

I recommend aiming for an emergency fund which equates to around three to six months of your annual salary.

This can be used whenever needed and rebuilt again.

In terms of pensions, there are many considerations to be made.

For workplace pensions, are you maximising benefits from your employer’s contributions? How much of your expenses will your state pension cover? The earlier you make plans for your retirement the better.

If you look forward to being able to retire but also want to maintain the same lifestyle as you do now, it’s essential to visit a financial planner ahead of your ideal retirement date.

Helping clients to visualise their financial futures with lifetime cash flow modelling is a key part of our financial planning offering at AAB Wealth.

It can help answer questions such as whether you will be able to retire earlier or at least reduce work commitments, or if you can maintain your desired lifestyle in retirement.

CRUCIAL: Don’t put off the important task of reassessing your personal finances.