Are you financially prepared for the unexpected?

Life, by nature, is a series of unpredictable events. We think we have a hold on it, but whether it’s the car that needs repairing, the job we’ve rather suddenly been made redundant from or the warm welcome of another child into the family, many circumstances will inevitably remain beyond our direct influence. However, what truly matters is seizing the reins of what we can control: our financial preparedness.

Granted, we can’t plan for every twist and turn. However, we can set up an adaptable yet robust financial plan to ensure we are best equipped to navigate whatever life throws at us for still achieving our financial goals for the short, medium and long term. Before we get started, let’s unpack what it means to be financially resilient, as this can seem like one of those abstract phrases which often gets thrown around without grasping its true depth.

In essence, financial resilience is the capacity to absorb and adapt to financial shocks – whether big or small – while ensuring you can maintain your lifestyle and continue moving towards your long-term aspirations, rather than being derailed. It’s about building a financial framework strong enough to bend without breaking, allowing you to weather any storm that comes your way and emerge with your future still intact.

So, where to begin? Like with any well executed exercise, you need to plan. Having a good plan means not only you have a sense of direction, but also that you’re giving your future self the best possible set up for having control and flexibility over what your future will look like. This article is going to delve into some of the many key aspects for building financial resilience.

Utilising the wrappers

Whether it’s an ISA, a pension, or another type of account, it makes sense to give careful consideration to any tax-efficient wrappers available – they can play a key role in making your money go further. These financial vehicles are designed to help your money work harder by shielding it from tax and having other tax advantages, directly contributing to your financial resilience.  

Flexible ISAs like ours allow you to contribute up to £20,000 per tax year, ensuring any income or gains you earn is entirely free from tax. These can be very useful tools for helping provide security for short, medium, and long term goals. For instance, our Cash ISA can house your emergency fund, providing immediate, tax-free access when the unexpected strikes. Meanwhile, our Stocks and Shares ISA can fuel growth for a house deposit, children’s education, or even bridge a gap to retirement, all without tax eroding your returns. This flexibility and tax-free growth directly contribute to your financial resilience by maximising the efficiency of your accessible savings and protecting your capital from tax erosion.

We’re constantly reminded about pensions, and for good reason, as they are arguably the cornerstone of a secure retirement. By contributing now, you’re establishing a powerful financial tool that will provide the crucial funds you’ll need to draw upon once your working life concludes. Regardless of your age, contributing now to your pension is setting you up for likely the best retirement as you’re giving your funds the maximum time to work for you.

While contributing early to your pension can significantly improve retirement outcomes, this depends on factors like investment performance, contribution levels, and market conditions. To give you just a few of the many features and advantages of contributing to our pension:

• Tax relief: One of the most compelling benefits of contributing to a pension is the generous tax relief on contributions. The government effectively tops up what you pay in. For a basic rate taxpayer, every £100 you contribute becomes £125 in your pension. Higher and additional rate taxpayers can claim even more through their Self Assessment tax return, making it an incredibly efficient way to boost your savings. This upfront boost is a direct injection into your long-term financial resilience. Although it should be noted that tax relief depends on individual circumstances and is subject to change.
• Tax-free growth and compounding: Once inside your pension, your investments grow free from Income tax and Capital Gains tax. This allows the power of compounding to work its magic over decades, significantly accelerating your wealth accumulation without the annual taxation you may get in other types of accounts. The longer your money is invested, the greater the potential for growth building a substantial safety net for your future.
• Long-term security: By contributing now, especially in your 30s, 40s, and 50s, you’re giving your funds maximum time to work for you. This long-term approach to pension saving builds a significant buffer, reducing future financial stress and ensuring you have a secure income stream, allowing you to maintain your lifestyle and avoid financial hardship in retirement. 

Laying the groundwork: from safety net to growth 

Poet Maya Angelou once wisely said: “Hope for the best, prepare for the worst and be unsurprised by anything in between”. That is why you should begin with an emergency fund. Low risk products like Cash ISAs or investing in money-market funds (like our Liquidity+) are in great need here for ensuring you’re able to take on any financial demands that may be required in the next one-two years.

So now that we’ve covered our short-term expenses, let’s look further to the future. Whether it be in an ISA or General Investment Account, there are several options. But a good place to begin is through our managed portfolios.

With a managed portfolio, you’ll typically complete a suitability questionnaire. This helps determine your financial goals and risk tolerance, leading to a recommended portfolio tailored just for you. It is quite typical to have multiple different portfolios, geared toward different goals (for example, a goal of a five-year time horizon being in a lower risk portfolio to a portfolio with a 15-year time horizon). Our managed portfolio services are subject to platform and management fees. Please refer to our fee schedule for full details.  

As you likely know by now, investing in stocks and shares involves risk. That’s why opting for a diversified portfolio is key. Diversification across different geographies, sectors, and asset classes helps to significantly mitigate against potential risks, making your financial future more resilient.

The power of proactive planning

Now that you’ve got to grips with utilising the tax-efficient wrappers and planning your portfolios to meet your current needs, what is crucial to remember is that financial planning is not a ‘set and forget’ exercise. As life changes and markets evolve, so too should your strategy.

To truly optimise your long-term financial resilience and ensure your portfolio remains aligned with your evolving goals, having access to ongoing, expert guidance is crucial. This is precisely the role of services such as our Guidance+, offering the proactive support you need to stay on track.

Guidance+ in a nutshell is a service designed to give you a personalised and holistic review of your financial situation, through the use of sophisticated software like FE analytics, helping you strategically to plan for your long-term goals. Financial resilience comes from the ability to adapt your strategy to those unpredictable life events. Guidance+, with its modelling of different scenarios, helps to demystify those elsewise incomprehensible what-ifs.

For example, what if you contributed a certain amount more to your pension, what if your retirement age changes or indeed, how would your assets and financial position be impacted should there be a financial crash? 

Regular annual reviews with these services help you build a resilient financial plan while ensuring you stay on track and well-prepared for life’s unexpected turns.

So, what have we learnt?

By building on the core pillars of financial resilience – using tax-efficient accounts, investing in portfolios aligned with your goals, and regularly reviewing your finances – you help ensure your financial plan stays strong, adaptable, and on track. Now you’re ready for whatever unexpected turns life might throw at you.

Capital is at risk. The value of your investments can go down as well as up, and you may not get back what you invest.