How to build wealth in the 2021-22 tax year
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincoln or other local offices.
Since COVID-19 swept the world in early 2020, many households across the UK have been put under heavy financial pressure. People have lost employment, had their working hours reduced, been furloughed or needed to close the business they worked so hard to build. Understandably, people are looking for practical ways to rebuild their wealth and provide a more stable financial future for their loved ones. In this article, our financial planning team at Castlegate offers some ideas on how people can build wealth in 2021-22. We hope you benefit from this content and welcome your thoughts.
If you would like to discuss any of these matters or discuss your own financial plan with us please get in touch to arrange a no-obligation financial consultation, at our expense:
01476 855 585
info@casfin.co.uk
Develop your outlook & financial education
The first step to growing your wealth is to believe that it is possible for you to achieve this. Many are under the belief that social structures largely dictate our standing in life. Whilst our environment undoubtedly plays a role in our fortunes (e.g. local job opportunities), we all have more control over our economic outcomes than we think. The World Ultra Wealth Report demonstrates this quite well, highlighting how 67.7% of the world’s ultra-wealthy population are “self-made” (e.g. they did not simply inherit their wealth).
The second step is to improve your financial education. Whilst you do not need to become a day trader or a financial adviser, having a firm grasp of key concepts such as investing, net worth, ROI (return on investment) and income streams will help you understand the financial world you inhabit – for years to come. This makes you less vulnerable to scams, better at finding ways to reduce costs which eat into your investment returns and more able to spot opportunities to grow your wealth over time. Learning is a continuous process, however, so do not expect to become a financial expert overnight.
Audit your expenses
Growing wealth involves finding the difference between what you earn and spend, widening that gap and committing most of it to growing your assets (versus your liabilities). This means getting a firm grasp of your income and expenses, first of all. Next, consider whether any discretionary expenses can be cut. Instead of then spending these savings on other luxuries, consider setting the money aside for investing.
Protect your wealth
Any wealth you generate has the potential to be swept away by unexpected disaster. Therefore, it is crucial to have a robust financial protection plan ready for different contingencies. If you die prematurely, for instance, then a life insurance policy could support your loved ones financially by providing them with a lump sum to settle an outstanding mortgage. If you fall seriously ill or become injured to the point where you can no longer work and earn, then a critical illness cover policy can provide a financial “cushion” for your household as you all adjust to your new reality.
Commit to an investment strategy
Simply putting disposable income into a cash savings account will be insufficient to grow your wealth over the long term to its full potential (although building a cash savings account for an emergency fund is a good idea; e.g. 3-6 months’ worth of living costs). Instead, it will be crucial to craft an investment strategy which suits your financial goals, situation and risk tolerance. This is often best achieved with the help of a financial adviser, who can create a strategy with you based on the best available information. They can point out investment opportunities which hold out promising rates of return, avoiding excessive fees and suited to your comfort level for investment risk. A professional can also help ensure that your portfolio is properly diversified, so you are not committing too much capital to one type of investment (i.e. putting too many eggs in one basket). Finally, when your strategy is established, it is important to stick to it over the long term and to review periodically with your adviser – ensuring your asset allocation stays on track.
Conclusion & invitation
If you are interested in discussing your own financial plan or protection strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
01476 855 585
info@casfin.co.uk
