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Financial Awareness Day takes place on 14 August every year. It encourages people to assess their finances and take steps towards better money management.
Taking control of your wealth could help you build the life you want – for yourself and your loved ones – while bolstering your wellbeing by reducing uncertainty and stress.
However, in the busyness of everyday life, finding the time to review and assess your finances might be challenging. Moreover, deciding where to start may feel overwhelming, leading to procrastination and delays. Unfortunately, this could result in unnecessary costs and missed opportunities.
That’s why we’ve put together this handy checklist to help you reflect on your financial position and identify steps you can take to improve it.
1. Budgeting and cash flow
Tracking your income and spending allows you to quickly spot inefficiencies and identify opportunities to make your money work harder for you.
For example, the Guardian recently reported that adults in the UK might be able to save up to £400 a year by cancelling unused or duplicate subscriptions. You could use such savings to move closer towards your financial goals, for example, by topping up your ISA or pensions.
Careful budgeting is especially useful for highlighting “lifestyle creep” – this is when your spending gradually rises in line with increases in your income.
Look back through your bank and card statements for the last three to six months to get a clear picture of where your money is going. Consider whether your spending reflects what matters to you most or if it’s hampering your progress.
You might notice certain unhelpful money habits, such as splurging on treats when you get paid or feel low. Once you’re aware of these patterns, you can take steps to address them and redirect unnecessary spending towards savings and investments that could improve your long-term financial security – without significantly compromising your current lifestyle.
2. Emergency fund
Life is unpredictable; you could face any number of unexpected events that affect you financially, such as losing your job, getting divorced, or becoming seriously ill.
You can’t prevent these financial shocks, but you can make sure you have money set aside to cope with them.
Maintaining an emergency fund provides a financial buffer, giving you valuable peace of mind.
While a common approach is to save about three to six months of essential expenses, it’s important to tailor the amount to your circumstances.
For example, you might need a larger emergency fund if you have an irregular income and dependants, compared to someone with a secure job and no responsibility for supporting anyone else financially.
However much you need as your financial safety net, make sure this pot of money is easy to access when you need it and keep it separate from the funds you use for day-to-day spending.
3. Savings and investments
Both cash savings and investments play an important role in your financial plan.
Building a pot of money you can easily draw on is a sensible strategy for achieving short-term goals, such as taking your family on holiday or buying a new car. However, inflation could gradually erode the real-term value of cash savings over time, making them a less effective strategy for funding things far into the future, such as retirement.
In contrast, investing in the stock market offers the potential for higher returns over time, making it a valuable part of your long-term plan.
That’s why it’s important to review your savings and investments to ensure the balance between the two is right for your needs and goals.
It’s also worth shopping around for the best savings rates to make sure your money is working as hard for you as it can. If interest rates on savings have gone up since you opened your account, you may no longer have the most favourable deal.
Finally, ask your financial planner to review your investment portfolio and make sure the asset mix, risk level, and performance still match your time horizon, goals and appetite for risk – all of which can change as you move through different life stages.
4. Debt and credit health
For many people, borrowing is an essential and useful part of life. A mortgage, for example, allows you to buy an asset that generally increases in value over time.
However, expensive, unsecured debt, such as high-interest credit cards, can quickly become unmanageable and reduce the amount of disposable income you have for everyday costs, saving, and investing.
Moreover, missed payments could harm your credit health, making future borrowing more expensive and harder to secure.
This Financial Awareness Day, review any outstanding debts and prioritise repaying those with the highest interest rates. You might find it helpful to speak to a financial planner who can advise you on structuring your debt in the most cost-effective way.
5. Pensions and retirement planning
If you still have a considerable number of working years ahead of you, it’s easy to overlook retirement planning when reviewing your financial health.
However, the earlier you start saving and investing for retirement, the more time your money has to benefit from compounding. This is where your pension wealth earns returns on both your original investment and the interest accumulated previously – it might help to think of it as returns on returns.
Here are a few key questions to ask yourself when reviewing your pensions and retirement plan:
- Does my retirement plan align with my current circumstances and goals? (Have my retirement age or income needs changed?)
- Am I contributing enough to my pensions to achieve the retirement lifestyle I want?
- Can I afford to increase my monthly contributions?
- Am I making the most of available tax relief on pensions?
- Should I consider consolidating my pensions into a single pot?
- Do I have a strategy for withdrawing funds from my pension when I retire?
At Sovereign, we can answer all your financial planning questions.
Our team can provide an objective view of your position and suggest practical ways to manage your wealth more efficiently.
To find out more about working with us, please email hello@sovereign-ifa.co.uk or call us on 01454 416653.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Approved by Best Practice IFA Group Ltd on: 16/7/26