City at night

Seven steps to a financial spring clean

03 Apr 2017

Justin Urquhart Stewart, Co Founder and Head of Corporate Development

Spring has sprung – well date wise anyway given the official Spring Equinox is behind us and the clocks have been wound forward – and the weather’s getting there too!

It is also the time of year that we are encouraged to throw open our windows, take in deep breaths of fresh air and give the house that traditional spring clean…yes, I get roped in too.


It should also be an occasion to clear out our financial files, not least as the end of the tax year is here, and April 2017 sees quite the number of changes to the tax regime being ushered in.


So what’s top of my to-do list? Well here’s my starter for seven:


1. Parcel up the paperwork

It used to be recommended that you keep your paperwork for seven years – that’s a number I can easily remember. Actually the number of years is five, not including the one you’re in at the moment, but that’s really just for business-related book-keeping.


Some paperwork obviously needs to be kept for longer – birth, marriage certificates and wills fall into this category, while insurance certificates and the like need to be kept as long as the policy is valid.


HMRC, meanwhile, recommends you keep personal tax records for 22 months after you filed your return, which is a very strange number and one that I don’t find that easy to remember. So I’ve taken to scanning in the files that I should save together in one folder using the delete date as the filename. Then I just have to go through my computer every so often and get rid of any stuff that’s out-of-date.


This lack of physical paperwork also means it’s easier to keep on file the documents that we don’t think that we need to keep, when we actually do. If the authorities start to look into your affairs and want a whole stack of historical documents, they won’t accept that your bank may no longer have that bank statement instantly available…and you’ll be punished either by them or by each provider charging up to £10 for that old record.


It’s also a good moment to work out what’s needed for an In Case of Emergency file. Death isn’t something anyone likes to dwell on, but keeping the important documents in one place will make it easier on the loved ones left behind.


2. Re-examine your risk tolerance

We’ve done some research into the various levers you can pull to help bolster your pension savings. Clearly saving more of your pay cheque will help. But once your pension pot reaches the level where your annual investment returns are bigger than the amount you’re putting in, then you should also look at your tolerance for (investment) risk and capacity for loss.


Here at 7IM, we encourage people to think about more types of risk than just the investment one – yes, there are unfortunately more that you should get your head around – and one, in particular, to have a think through is goal risk.


You start by making an informed decision about how much you need to retire on, either by getting some advice as to how to work out that number or, at the very least, download our app, 7IMagine to help. You can then work backwards to determine much to save and how much investment risk you could take to achieve that goal with greater certainty.


You may already have done a risk questionnaire that plots you anywhere between a cautious to an adventurous investor (depending on your tolerance for investment losses), but looking at the maths the other way makes sure you get your plans right.


We are absolutely not advocating that everyone takes the maximum amount of investment risk. We are simply saying that you take the minimum amount of risk needed to reasonably hope to reach your goals and that this may be higher than you initially feel comfortable with. This conversation also helps you understand what else you need to do to achieve your goals (such as increase your timeline or save more) if increasing your investment risk is not something you’re prepared to do.


3. Compare and consolidate

The worldwide web has a wonderful list of sites that enable you to compare the costs and contrast the benefits of a number of financial services providers, amongst other suppliers. These services are as good as their adverts are awful. You can also check your credit rating for free at and that in turn may enable you to save on some credit card bills and loans.


And now is an excellent time to think through whether you want to consolidate any ISAs and/or work pensions. With markets still near record highs and your capital gains tax about to be reset to zero, you could take some profits on some investments or pool some of those pots. We can help you do this if you’ve ended up with lots of little pots across a number of providers – all too easy these days. This would enable you to better understand what you have already worked hard to achieve and what else you have to do to retire as desired.


4. Scrutinise your spending

This opportunity to file bank statements properly and sort out your financial affairs never fails (especially in my case) to uncover something that time forgot. Whether it’s a direct debit or an old subscription for something you never use, it’s amazing how these tally up.


Now back to those credit card bills – now’s the time to see whether you can repay any outstanding amount and set up a direct debit to pay off any bills at the end of each month. You’ll save yourself a fortune. I do this as I got into a horrible mess at university because of the interest payments and how they quickly accumulate through compounding. It took me six years in the end to get rid of that debt…never again!


5. Step up the saving
There used to be a guideline that you put into your pension a percentage that was half your age: so if you were 25, you’d look to save 12.5%; if you were 40, you’d save 20%; and so on. In reality this isn’t always possible, so you start to procrastinate about your pension and may never start anything.


Clearly you will spend money on your home or family, but do you really need to change cars every three years? I’ve driven the same Morris Minor Traveller for double that and plan to continue, which suits me perfectly. Work out what’s important for you and then determine what you can sensibly save. I often treat savings like dieting…if you go all out, you’re bound to fall off the wagon at the first hurdle.


Steady and consistent payments are also a much better option because you can take advantage of the notion of pound cost averaging. Here, by investing through regular payments, more units of a fund are purchased when prices are low and fewer units are purchased when prices are high, and you’ll be better off in falling markets. Oh…and do reinvest your dividends…it’s amazing how quickly they accumulate!


6. Apply your tax allowances

There are a fair few tax changes this year that should make you pause for thought financially.


On the positive side, your annual personal allowance is going up by £500 per person, and the threshold for the higher rate of tax is up by £2,000 outside of Scotland. There’s a new £100,000 per person property allowance, in addition to the existing inheritance tax allowance. And the ISA allowance will jump to £20,000.


There are a few takeaways too though. Dividend allowances have been cut from £5,000 to £2,000, and any buy-to-let properties will (over the next four years) increasingly not allow you to offset the cost of mortgage interest payments against rental income. Also look out if you’re providing services to a company through your own limited company as there’s some amends here too. Last, but not least, the tax on insurance premiums is going up.


It’s also worth going through the list of things against which you can claim tax relief. For example, a lot of people don’t realise that their membership of the National Trust, English Heritage and London Zoo counts as a donation to charity. Even if you ticked the gift aid box, higher rate taxpayers can claim back the rest of the tax paid on their donation.


All this can add up to quite a lot and so while 7IM isn’t able to give individual tax advice, particularly since everyone’s personal circumstance are quite different, we can help you use up the various allowances you’re entitled to.


7. Create a 2017/18 calendar

The easiest thing to do to stay on top of things is create a calendar. Nothing complex – just a one pager will do on which you can write in any employment pay dates, when subscriptions fall due and direct debits go out of your account etc. You can also include dates when your next portfolio review is due if you have help managing your investments, or when you should review them properly if you’re a DIY investor.


To help, we’ve put a really basic one together – all crammed onto one page so you might need a magnifying glass to read it or print in out on A3 paper. 7IM can even post one to you if you email us your contact details to!

Given this is just common sense, I am quite confident that you have actually worked through some or all of this list, but if you think anything is even remotely difficult or radical, we’d be really happy to help. Just give us a call to find out how.

Justin Urquhart Stewart
Co Founder and Head of Corporate Development

Before you go

We hope you’ve enjoyed reading this article. Use the Get in touch box below to sign up for future investment updates. These take the form of regular market and investment updates and our 7IM webinar series. 

Seven Investment Management LLP is authorised and regulated by the Financial Conduct Authority. Member of the London Stock Exchange. Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England and Wales No. OC378740.

The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

An error occurred!