In today’s article, we are sharing a video we published recently about good and bad financial habits.
This short, educational video is delivered by one of Sterling & Law – Hampshire’s independent financial advisers George Rashbrook and is part of our ongoing commitment to helping people develop their financial literacy and knowledge.
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Good vs bad financial habits
We’re getting to that time of year when people start talking about resolutions. At the start of a new year, people often resolve to break bad habits and adopt new good ones.
Financial planning is all about habits.
Good financial habits make our futures more comfortable, secure and exciting.
Bad financial habits slow us down from achieving our goals.
Even very tiny things can make a massive difference.
Related reading: Looking for a local IFA? Read our guide about choosing a financial adviser
It’s all about the habits
If you were to ask my wife and I what one of our worst financial habits is, we’d probably mention these apps we both have on our phones.
You know the ones – you open the app, tap a couple of times, £30 goes out of your account and 45 minutes later someone brings some delicious food to your door.
Obviously, I’m not begrudging anyone a takeaway. Although I would encourage you to support local independent businesses before giving your money to corporate chains.
If you’re ordering a takeaway five nights a week and burning through your entire paycheque every month, putting nothing aside for the future, that could be said to be an unhelpful habit.
If it’s a once a week treat that you both look forward to and thoroughly enjoy then maybe that’s not such a bad thing.
After all, £30 a week between the two of you is nothing, is it?
Or is it?
Let’s talk about good financial habits
What would happen if I were to put that same £30 a week into my pension?
Let’s take a look.
If we assume you only get basic-rate tax relief of 20% and growth of 3% a year after charges.
Please note – returns are not guaranteed, investments can go down as well as up, you could get back less than you originally invest.
By the time I reach state pension age I’d have an additional £17,227 in my pension.
Related reading: Tax relief on pensions contributions explained
That’s not a lot of money, is it?
By saving the amount (£30 per week) we just described as being relatively insignificant, I’ve given my future financial security a massive boost.
A tiny change, multiplied by long term additional incremental pension contributions could equal financial security for you.
Another good financial habit that could make a massive difference
What if I increase my pension contributions by 5% a year?
Another tiny change.
This year I pay £30 a week.
Next year I pay £31.50, the following year increase by another 5% and so on.
Instead of £17,227 in my pension, I’d have £30,880
Another example of a good financial habit, accompanied by small changes making a massive difference with good forward financial planning!
I’m not saying everyone should be paying into a personal pension – what’s right for you would be based on your personal circumstances.
Have you considered speaking to a specialist pensions adviser?
If you think you don’t need to consider financial planning because you don’t have a quarter of a million to invest or a six-figure salary, maybe you need to think again.
Take independent advice, develop good habits and plan ahead!
Find out more about how our local pension advisers can help you on your path toward your ideal retirement.
Good financial planning is much more than pensions
Pensions are certainly an important part of the financial planning process. For many, they are key to securing income in later life.
Depending on your own financial circumstances and life goals there are many types of investments and strategies that can help you realise the financial future you desire.
Buy to let properties, tax-efficient investments for business owners, investment funds, and more can all form part of a relevant financial plan.
If you are thinking about your future, our experienced financial planners can help.
Find out more about our financial planning service today.
Financial life planning software
To complement our financial planning service, by utilising industry-leading software, we offer a personal life cashflow service.
This software allows us to work together and project some long-term financial scenarios based on your current income and expenditure, the value of any investments and pensions you may have, the equity you hold in your property and more.
Furthermore, our skilled independent financial advisers can use this software to model your long-term finances and potential wealth based on a range of factors. For example, this includes making financial adjustments in areas such as mortgage overpayments vs apportioning the same funds into a pension instead.
If this sounds interesting to you, find out more about our personal long-term cash flow modelling software today.
Thinking about later life? Our retirement planning specialists can help.
If you are looking to plan for your ideal retirement, or have no idea of the retirement you desire, we can help.
Some people know the retirement they desire but need help in making it a reality for a variety of reasons. On the other hand, others have no idea of the retirement they want, and want some help to understand their options.
In either case, we can help!
If you want to discuss your options in later life, talk to one of our retirement planning specialists today.
Financial articles and videos from the Sterling & Law – Hampshire team
Please note: all information contained in this video was right, and correct at the time of publishing and has been sourced from reputable mainstream sources.