Matt Hignett recently wrote an article to be featured in Oswestry Life Magazine offering some financial advice. Here he explains some possible options regarding your finances. Clients come to see me quite often with the same two queries; both of which have simple solutions.
Firstly, ‘How much cash should I be holding in my bank account?’
The answer to this is always client specific, although the accepted industry standard is 6 months’ expenditure. Realistically I don’t think this works, and would rather treat this as a minimum figure to set. This is because the ‘Mr and Mrs Average’ and ‘one size fits all’ does not work in this situation.
The more important question to be asking is, ‘How much cash do you need to hold in your bank account to cover emergency expenses and to feel comfortable with the situation?’. This is a personal dilemma that can be settled with the help of a qualified financial planner, and is much more important than any financial calculation that tells you what you should be comfortable with. Some people will be happy keeping the bare minimum in cash, while others will want a substantial buffer to make them feel secure.
The second query is, ‘Can I get a better return on my cash without taking a large amount of risk?’
Again, there is a simple answer to this…. YES!!! Not all investments are risky stock market plays that directly mirror stock market movements. For those investors who want to take a more cautious approach, there are investments that are specifically designed to meet their objectives by beating the returns offered by cash.
These investments aim to smooth out the ups and downs of the stock market, removing short term volatility and giving a more measured and continuous return. They do this by investing only a small portion directly into stocks and shares and the majority of the investment into more cautious, fixed investments.
These investments offer projected returns of 3-3.5% per year and are available through stocks and shares ISAs, which make the returns and investments massively tax efficient, while also allowing existing cash ISAs to be transferred without losing the existing ISA allowance, or using up the current year’s allowance.
Obviously, the key to any investment is matching the correct client to the correct investment – after reviewing the client’s needs, objectives and personal circumstances, and the majority of providers will only accept these investments for clients through their adviser. That’s where using a qualified financial adviser comes in. Please remember past performance is not an indicator of future returns.
So, if you want to know how much you should be holding in cash and are unhappy with typical interest rates of 0.10%-1.5% per year with the banks, give me a call on 01691 670524, email [email protected] or pop into Beaumont Financial Planners Ltd at 21 Salop Road, Oswestry for a free, no obligation, initial chat.