7 straightforward steps to give yourself an end of year financial MOT

December 2022
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2022 has been a tumultuous year from an economic perspective. At the end of November, inflation was at its highest point for more than 40 years and the Bank of England base rate was at a 14-year high of 3%.

The ongoing cost of living crisis is creating financial challenges for many people and households.

So, the period between Christmas and the new year could well be the ideal time to step away from the mince pies and seasonal TV programmes, shut yourself away for an hour or two, and review your finances.

Follow these six steps to give yourself a financial MOT. 

1. Start by getting a clear understanding of your financial position
Having a high-level overview of the state of your finances is invaluable, as it can really help you manage both your long- and short-term financial situation. 

If you haven’t already done so, compile a straightforward spreadsheet that lists all your monthly expenditure and income.

Your bank statements will be a good starting point for much of the information you need.
Next, list all your debts, including credit cards and other borrowing, and how much you’re spending on repayments.

It’s also worth noting planned upcoming expenditure, such as holidays, home improvements, or a new car. 

2. Review your pension funds
Having started your spreadsheet, the next step is to populate it with your financial arrangements, starting with your pensions. 

List all your pension funds – not only the one you’re currently contributing to – and look up the latest fund values. Also, make a note of where your money is invested in each case and check you’re still happy with your investment choices.
Note down the amount you’re paying in and see if there’s any scope to increase your contributions. 

Read more: What do your pension contributions mean for you?

Remember, pensions are one of the most tax-efficient ways of saving money. An extra payment into your plan at the start of the new year could give your fund a valuable boost. HMRC automatically add basic-rate tax relief to your contribution and additional rates of relief can be claimed through your self-assessment tax return. 

Finally, make sure you have expressions of wish in place for all your pension funds.
3. Check all your other savings and investments
As well as reviewing your pension arrangements, check your other savings and investments and see how much money you’re setting aside each month.
The effect of compounding means that increasing the amount you save annually can make a significant difference to your future prosperity. So, wherever possible, resolve to increase the amount you’re saving each year.
If you haven’t already done so, set up direct debit mandates for your investments so you’re making regular contributions each month, rather than simply adding money sporadically.
As with your pensions, check your investment details, too. Make sure that you’re comfortable with where you’re invested and the level of risk you’re exposed to.
4. Confirm you have enough life cover in place
Death or serious illness are awkward things to have to consider. But a key part of your financial check should be to ensure your family will be able to manage financially if you’re unable to provide for them. 

Check that the amount of life cover you have is sufficient. At the very least it should be enough to clear any outstanding debts you may have. Ideally, it should also provide a lump sum big enough to give your family an income to live comfortably for a certain period.
5. Take steps to ensure you’re prepared for potential emergencies 
Unforeseen events do happen, and it makes sense to be as prepared as possible. Yet, according to a Finder survey, a third of people have less than £600 in emergency savings.

As part of your financial MOT, make sure you’ve got an emergency fund in an easy access savings account that you can draw from if the need arises. 

A rough guide is that this should be between three and six months’ net household income. Having an emergency fund set aside should mean that you won’t have to resort to potentially expensive short-term borrowing in the event of a household crisis, such as needing a new boiler. 

The other potential emergency you should plan for is if anything happens to you. You’ve already considered your life cover, but you should also ensure that all your financial paperwork is accessible to your spouse or partner in the event of an emergency.
Set up an “in case of emergency” (ICE) file that includes details of all your finances, including what you’ve covered in this financial MOT. 

It’s also a good place to set out information regarding insurance and utility contracts, as well as a list of account numbers and online passwords to your financial arrangements. 

Once complete, remember to keep it updated and make sure you keep it somewhere safe. Then, tell someone you trust where they can find it.

6. Make sure your will is up to date
Key life events in the past year may mean that you want to re-assess the terms of your will and maybe make changes to it.

Such events could include divorce, or the birth of children or grandchildren.
If you don’t have a will already in place, now is the ideal time to start taking steps to get one set up. It’s a very straightforward process, and means that, when you die, your assets pass to the people you want them to – with the minimum of delay. If in doubt, get in touch – we can help.

7. Resolve not to put off financial tasks. 
The start of the year is a good time for making resolutions and forming good habits. 

There are many financial new year resolutions you could make. As a priority, why not resolve to complete financial tasks on time, rather than putting them off to the last possible minute?

As well as being good practice, it actually makes sound financial sense.
Reacting immediately to financial issues and completing admin such as your self-assessment tax return promptly at the start of the next tax year rather than at the deadline, could save you money.
Get in touch 
If you need help or advice regarding any of the financial issues you’ve read about here, please get in touch. 

Email clientenquiries@lebc-group.com or call us on 0800 055 6585.

Please note
The information contained in this article is based on the opinion of LEBC Group Ltd and does not constitute financial advice or a recommendation to any investment or retirement strategy. 
You should seek independent financial advice before embarking on any course of action. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.
The value of your investment 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.

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