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Three questions to ask yourself to start understanding your finances


Date published

Financial planning doesn’t have to be daunting. Framed the right way, it can be incredibly intuitive. When working with our clients we find out three important things from them:

  1. What do you have?
  2. What do you want?
  3. When do you want it?

Sound financial planning is tailored to the individual. You will know when you’ve found a good financial adviser because before they event start thinking about investment options, tax or estate planning, they will ensure they have a sound understanding of your answers to these three questions.

The first question: “What do I have?”

The first question to ask yourself may include more than you might first imagine. This is not simply the number in your bank account, however large or small it may be. Here we’re talking about the sum total of both your assets and liabilities. One of the first conversations any good financial adviser will have with you will begin here, as it’s only from gaining a firm understanding of where you are today that we can begin to develop a plan to get you where you want to be tomorrow.

Your assets

The most obvious asset many of you will have other than your bank account will be your home. This may, of course, also come accompanied by a substantial liability in the form of a mortgage. While many homeowners, particularly in the south-east, have seen the value of their home soar in recent years, for most it would be unwise to consider ourselves genuinely wealthier as a result. The vast majority of us feel in some sense rooted to our area. And to paraphrase the late comedian Ed Wynn, “there’s no point being the wealthiest man in the homeless shelter”.

Should you release equity?

Products that allow some of my more senior readers to release the value they have built up in your home, while still retaining the right to live in it have become popular. However, they can prove extremely technical to administer, with a lot to consider, so it is only recommended that you consider doing so with financial advice. While at Gibson Lamb we don’t specialise in this area we know some excellent firms who do.

Other assets may include – more obviously – savings and investments. The number of people who hold pensions, ISAs or even insurance products with investment values that were set up years ago, and have long since been forgotten, may surprise you.

And thanks to the combined benefit of compound interest and, in the case of pensions and ISAs, tax-free growth, their values may be more than you think.

Your liabilities

As previously mentioned, what you have may also include a number of liabilities that have to be taken into account. Most obviously, this may include mortgage re-payments and other debt, but think too about the cost of long-term and upcoming financial commitments: university for the children, care-home costs for elderly relatives or even insurance premiums should all be taken into account as and when appropriate.

We can then add to the picture your – and perhaps your partner’s – income and expenditure to gain a holistic and, most importantly, realistic view of where you currently stand.

I will be looking closely next two questions in two future blogs, and this will be updated with links to those. In the meantime, if you have any questions about this or would like to book an appointment with us, please get in touch by emailing or calling 020 7839 3582