In the face of long hours, high workloads and the challenges of adapting to remote and online consultations, managing personal finances might have understandably fallen to the bottom of your to-do list.
Lockdown might, however, have given you the opportunity to save more than usual. Our own research found that, on average, individuals saved £276 a month during the coronavirus pandemic, compared with £240 before.
If you have been able to put some extra away, it will be important to consider how you can use this money to support your personal and financial goals and make it work as hard as you do.
Below are four key things to think about when it comes to using those extra lockdown savings.
At Wesleyan Financial Services, we understand GPs’ unique financial needs. Our specialist financial consultants are available who can offer advice at every stage of your savings journey, from setting targets through to reviewing your pension savings. For more information visit: https://www.wesleyan.co.uk/secure/gp-1002660
Review your savings plans and targets
Any saving habit should be accompanied by a savings strategy – understanding what you need the money for, combined with your own personal circumstances, will help you determine the best way to manage your money.
Being able to save that little bit extra over the past year might have meant that you’re now closer to any existing goals you had established, or in a better position to set-up new ones.
As a very first step it will be important to review your targets to ensure they align with your current circumstances.
Before putting money towards any goals, however, consider whether you need to start, or top-up, an emergency fund for a rainy day first.
Setting aside three months’ worth of net household income is a good starting buffer. With this in place, you can then think about committing money to other savings pots.
Don’t overlook retirement
For some, retirement can feel like a long way off, but it’s important to start planning for the day you step back from your practice as early as possible.
You may want to consider putting any extra lockdown savings towards your retirement plans. Speaking to a financial adviser can help you understand the best way to put your money towards your retirement – be it investing, or by purchasing additional pension through the NHS Pension Scheme.
If you haven’t yet established a retirement strategy, now could be the perfect time to do so.
It’s important to consider factors such as when you’d like to retire, and what retirement will look like to you. From here, you can determine how much income you will need at different stages of your retirement and how you can grow your pension pot.
Again, a financial adviser can support with this process – they can help you calculate the financial implications of choices such as taking a phased retirement or working past your retirement date, and understand when you can start to withdraw funds from your pension savings.
Investing, investing, investing
With interest rates currently lower than inflation, simply keeping cash in the bank means that the value of your savings effectively falls over time.
Putting some of your extra lockdown savings into investments can provide a way to grow your wealth by helping to beat low interest rates, outperform inflation and build new income streams. And you don’t need huge sums to start investing – any amount of money can be put to work.
The very first thing to consider is whether investing is right for you. Investing isn’t a ‘quick win’ and generally takes place over longer periods of time – at least five years, but typically longer. If you know you might need your savings sooner, investing might not be the right option.
You will also need to consider your appetite to risk – the value of your investments can go down as well as up. Each asset you can invest in, whether it’s property, bonds, cash or stocks, comes with its own level of risk, as well as its own degree of reward. Diversifying your investment portfolio by spreading investments across asset classes can offer a degree of protection against a single asset’s poor performance.
An easy way to do this is to put your money in an investment fund that covers many different types of assets, spreading the overall risk. Each fund has a risk rating that you can use to see if it’s a good fit for you. Please remember the value of investments can go down as well as up and you may get back less than you invest.
Using your tax-free savings allowances can help you make the most out of the lockdown cash you’ve put aside. Putting your money in an Individual Savings Account (ISA) could be a good option to consider. You can save up to £20,000 tax-free into an ISA and there are a range of ISA types you can use.
For example, a cash ISA allows you to save money in cash, meanwhile, a ‘stocks & shares’ ISA – such as Wesleyan’s With Profits ISA – allows you to make investments with your money in assets like funds, bonds or individual stocks (see table below)
Wesleyan’s With Profits Fund was recently ranked 1st place* for its five-year net return of 7.31% by independent actuarial services provider Barnett Waddingham. And because it’s an ISA, our customers didn’t pay tax on any returns they earnt.
The following table shows actual cash-in values over one, two, three, four, five and ten years for the With Profits ISA where a lump-sum subscription of £10,000 has been paid.
|Wesleyan With Profits ISA|
|Inevestment returns with £10,000 lump sum payment||£9,858||£9,968||£10,292||£11,371||£12,265||£17,738|
|Source: Internal Figures as at 1 January 2021.|
Figures shown are net of AMC and include the effects of smoothing with regular bonuses and a final bonus added.
Please note that past performance is not a reliable guide to future performance and the value of your investment can go down as well as up, so you could get back less than you invested.
*The fund was placed 1st out of 20 funds for overall performance. Only 20 of 65 funds provided five year net return data for comparison.
Advice is provided by Wesleyan Financial Services Ltd. ‘WESLEYAN’ is a trading name of the Wesleyan Group of companies.
Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority and is wholly owned by Wesleyan Assurance Society. Wesleyan Assurance Society is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Incorporated in England and Wales by Private Act of Parliament (No. ZC145). Registered Office: Colmore Circus,