The budget is rapidly approaching and as rumours circulate about what could be in store for taxpayers, it’s understandable why many of us will be feeling a sense of uncertainty. But there’s no need to panic or rush into any decisions. As William explains this is why sound financial planning will be more important than ever.
Why should teachers make a financial plan?
Financial planning will be different for everyone, but with the budget shortly to be announced there are a few key principles that can help you to stay on track.
A strong financial plan should map out your priorities, considering what you need to achieve your goals, how you’re going to achieve them, and, perhaps most importantly, how you’ll navigate any unplanned changes in the future.
If growing your savings is key to reaching your financial goals, it’s worth reviewing whether your current saving method is truly helping your money grow. This is especially important if the interest you’re earning isn’t keeping up with inflation. When that happens, your money’s buying power can shrink over time. For example, £1 might buy you a muffin today, but in five years, that same muffin could cost £1.50, meaning your savings won’t stretch as far as they used to.
Another area that can often get overlooked, is how you’ll cope with any unplanned changes in your plan. If you were to become ill, how would you fund your current lifestyle? Would you be able to pay your mortgage and your other bills? If the answer is no, it may be worth factoring income protection into your plan.
Finally, remember to regularly review your plan. Ideally, this should be done at least annually to take account of changes to your income, your circumstances and your financial goals. And, if changes in the budget impact your existing plan, it may be worth speaking to a financial adviser to consider how you could mitigate this.
How can teachers ensure their money is working for them?
Whatever the budget may throw at us, making sure your money is working as hard as possible will be key to your plans. Being able to grow your money largely depends on the vehicle it sits in. For example, if you put your money in the bank, they will decide the rate of interest that you get because they’re in control.
However, that rate of interest won’t take account of what the cost of living is. So, if you leave your money in the bank, you’re accepting what you get which might not even be enough to keep up with inflation.
If you’re looking for ways to make your money work harder, you could consider an investment. This approach won’t be right for everyone because you’ll need to be able to leave your money untouched, usually for at least five years.
There are lots of ways to invest, one of which is through an investment fund. This is where your money is pooled with other investors to buy a range of assets. Rather than owning the assets outright, you own units in the fund, which can go up and down in value depending on the success of the investments.
The fund will be managed by a fund manager, who runs the investment on behalf of all the investors. As the fund is managed for you, you don’t need to be an experienced investor to invest in a fund – but you will need to pay a management charge each month or year.
Another thing about building your money over time, is to keep reviewing the budget you have set yourself. That’s because you could get to your savings goals quicker if you continually review the availability of the money you have to spend and what you have to save.
It’s always about aligning the money you have with your objective and continuously reviewing progress along the way.
What should teachers avoid doing?
Although it can be difficult, try not to rush into any financial decisions that may be difficult to reverse at a later date.
For example, we know that many teachers have chosen to leave the Teachers’ Pension Scheme over affordability concerns. Although it may be tempting to save on your contributions now, remember that the TPS is one of the more generous workplace pensions in the UK. Leaving the scheme would mean losing out on a 28.8% employer contribution if you’re a teacher in England or Wales.
It’s also index-linked, meaning it will increase with inflation, protecting you against rises in the cost of living when you reach retirement. The TPS also offers generous death in service benefits, which are unlikely to be replicated in alternative schemes.
If making your monthly employee contributions to the scheme has become too big a drain for your finances, it may be worth speaking to a Specialist Financial Adviser. They can help you to assess your situation, and if you still choose to leave, offer guidance around how you might bridge the gap in retirement savings in the future.
Whatever the Autumn Budget brings, reviewing your personal finances with a specialist adviser can help you understand your options and make informed changes, to ensure your money is working as hard as you do in the classroom.
To book an appointment with a Specialist Financial Adviser from Wesleyan Financial Services visit: https://www.wesleyan.co.uk/teachers
Charges may apply. We will not charge you until you have agreed the services you require and the associated costs.
Bear in mind that the value of investments can go down as well as up and you may get back less than you invest.
About: William Adams is a Specialist Financial Adviser from Wesleyan Financial Services, supporting teachers, school leaders and their families with financial planning to secure their financial futures.
Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority. Registered Office: Colmore Circus, Birmingham B4 6AR. Telephone: 0345 351 2352. Calls may be recorded to help us provide, monitor and improve our services to you.
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