2018 ended with a bit of a sting in the tail for investors, where we saw a lot of volatility in markets and a modest correction. While many analysts are forecasting single digit growth in 2019, they are also suggesting that 2019 may be another bumpy ride for investors with more volatility in markets. We fully recognise that volatility can cause uncertainty and lack of confidence for investors, but it's our job to help you to avoid making mistakes now that will hurt your long term financial future. 

Here are a few habits and behaviours that we believe will stand you in good stead throughout 2019, and will prevent you from making short term mistakes that will negatively impact you in the future.  

At the start of a new year and as outlined in our other article this month, we all tend to take stock of how we manage our finances. We look at our financial habits, ways of saving money and managing our spending better. This is also a great time of year to take a hard look at our retirement planning, to ensure it is in the best shape possible.

Here goes on five reasons why we think it’s a good time now to do so.

We hope that you have experienced the quiet evolution of our role in recent years. Going back in time, the role of the financial adviser was to help clients to identify gaps that they had in their portfolio of financial products, to find the best products to fill those gaps and to then put these products in place for clients. While this is still an important strand of what we do, our role has evolved in recent years into a much broader and more valuable service.

Paying tax bills can be a challenging time for both business owners and sole traders alike. Of course if your business is very successful, tax is simply an expense that needs to be met when your tax payment deadline rolls around. However, there are also many small enterprises that don’t enjoy the comfort of high levels of excess cashflow. For these businesses, the tax payment deadline can be a stressful time, gathering all expenses together and working with your accountant to identify ways in which you can legitimately reduce your tax liability.

Pension contributions are rightly viewed as one of the most effective ways of reducing your tax liability. The challenge is often having the spare cashflow to make that pension contribution while also being able to meet your tax payment! And as a result, the pension contribution often gets reduced or indeed removed in order to meet the tax liability. The unintended consequence of this is that your retirement plans and future lifestyle are now at risk.

So what’s the alternative?

The approach that many sole traders and business owners take to overcome this problem is to make pension contributions regularly (usually monthly) throughout the year, rather than leaving the pension contribution until the last minute. This approach has a number of advantages.

You’re putting yourself at the top of the queue

Leaving your pension contribution until the end of the year results in this payment being based effectively on money available, rather than your retirement plans. The outcome is often a reduced pension contribution and when this happens, the loser is your future self. Your retirement plan is being paid after everybody else, putting you right at the back of your cashflow queue.

The alternative is to work with us on identifying a sustainable regular amount. By then making this contribution regularly each month, you have accelerated yourself to the top of the queue, putting your future self before other expenses. After a while, this simply becomes another regular expense of the business (like your rent, salaries, power and other monthly payments) but now you are truly working for yourself and not just to pay other people’s bills.