However, it is worth checking in from time to time to ensure that you are still on track and to see whether there are areas where you could improve. Mid-year is as good a time as any.
We suggest asking yourself five key questions.
1. Has your life changed?
Big life events don’t happen regularly, but in the whirlwind of getting married, having a baby, or moving jobs, rethinking your financial plan may not seem like a priority. Yet any major life event can change your household finances or your financial plans, so it is worth reviewing them with fresh information.
For example, it makes sense to revisit your will from time to time to check that there is no one you would rather remove, or people that you should add. Equally, you should check the beneficiaries of your pension and life insurance. These are separate from your will and often involve significant sums, so you want to make sure they would end up in the right hands.
2. Are you making the most of tax allowances?
A mid-year check can allow you to look at whether you are using your tax allowances efficiently. ISA and pension allowances are a good place to start. Your annual ISA allowance is £20,000 per year, and it operates on a use-it-or-lose-it basis, so check your monthly savings to see whether you are making the most of it. For example, do you have any savings sitting in non-tax-sheltered accounts that you could move across?
The same is true for pensions. Your annual allowance is up to £60,000, depending on your earnings. You can also use your allowance for up to three years previously. The tax benefits associated with pensions are constantly under review, so squirrelling away savings while you still can is important.
A final consideration is around gifting. Making the most of your annual gift allowance of £3,000 is one of the easiest ways to take money out of your estate for inheritance tax purposes. The earlier you start, the more potent its impact can be. If you haven’t used it yet, think about making plans to do so.
3. Have I budgeted for what’s coming up?
Mid-year can be a time to look at your spending plans for the year ahead. Do you have any big bills coming up, such as school fees, holidays or home repairs? It will hurt a lot less if you set aside a little every month than if you wait until the bills are due. Equally, this may save you having to put it all on a credit card, which can be far more expensive in the long term.
It is also worth looking at potentially significant changes to your outgoings: this could be a child going to university, or the expiry of a fixed-term mortgage. Forewarned is forearmed, and you can start making contingency plans.
4. What are my current pressure points?
Spending can creep up on you. The takeaway becomes twice-weekly, and the Uber bills mount up. A mid-year check-up can help you examine where you’re really spending money – and where it might make sense to cut back. Most banking apps now have functionality that allows you to assess your spending, and this can help identify weak spots. Directing any savings towards an ISA or pension can give you an additional benefit in terms of financial resilience.
It is also worth identifying potential risks to your current lifestyle. Do you have sufficient savings to see you through a period of job-hunting, for example? Are you covered in the event of an illness? Is your life insurance cover sufficient to meet the needs of your family? Carefully-laid financial plans can be disrupted by a single unlucky event, so it is worth looking at what you might be able to do to prevent it or, at least, manage around it.
5. Is my investment portfolio still fit for purpose?
Stock markets change. While we wouldn’t suggest looking at your investment portfolio too often (tinkering will often leave you poorer), it’s worth checking that it still meets your investment goals and priorities. For example, if a certain segment of the stock market has done particularly well, it can become a larger and larger part of your portfolio unless you take steps to rebalance. Investors who don’t rebalance risk being overly-exposed to a single sector – a medium risk portfolio can quickly become a high risk portfolio in that instance.
Equally, your needs will change as you get older, or if there are changes to your lifestyle. If you are made redundant, for example, you may want to switch to income-generating assets to cover your outgoings for a while.
You may not need to change anything at all. But a mid-year MOT can help keep you on the financial straight and narrow.