Plymouth (01/10/25) – With the last quarter of 2025 now upon us, aside from the dread of Christmas expenditure, paying down credit card balances and completing tax returns, Richard Watkins of Continuum Financial Services suggest 10 things to do before the year-end.
- Figure out if you are spending as planned at the start of the year. Spending less gives the scope to save. If you are spending more look at what you need to cut down on to realign your finances.
- Consider the outlook for your income. Is there scope to earn more and invest for your future? Set out a clear plan to follow for what you would do with additional income or what you will have to cut back on with a lower one.
- Check if you are spending more than you are earning each month. If you are: stop. Do something about it – you are accumulating future worries.
- Set a financial plan. As a first step list your aspirations, goals, and worries. Do not hold back – it is your financial life, take control, but be realistic. Bringing everything together provides focus and enables you to plot progress and make changes as they happen.
- Make sure you are using tax allowances as efficiently as possible. Consider transferring unused allowances to your spouse/partner if you meet the criteria.
- Savers should do a reality check on their annualised growth requirement (AGR). If your AGR is 4% pa but you require 9% then you are not saving enough to match your aspirations.
- Look at the impact of inflation on your finances and if borrowing the interest rate you are paying. For example, average rate of UK inflation 2000-2024 was 3.5%. It grew to 6.5% 2020-2024 but has since fallen back, but still higher than average.
- Do have difficult conversations. If you are relying on an inheritance to repay any debt or provide additional comfort, then the conversation with mum and dad about what is in their wills is required.
- Conduct a financial disaster check. Where would you be if you became seriously ill, or if you or your spouse died unexpectedly? Work out your minimum income requirement and consider life assurance if you need to repay debt.
- Make or revise your Will and explore, if necessary, a Power of Attorney. Ensure any future mess, confusion, cost, and delay is avoided by setting out clearly your true intentions.
Richard Watkins, Certified Financial Planner at Continuum, said:
“We all are absorbed by certain times of the year regarding our finances but taking stock before the year is out is vital.
“Do not delay doing these things – as the old saying goes ‘you may delay, but time will not’.
“Give yourself an early Christmas present and quite simply start 2026 on the front foot”.
ENDS
10 THINGS: NOTES TO EDITORS
ASSUMPTIONS
Assumptions are important as can make a dramatic difference to the outcome.
- Period being examined.
- Average rate of inflation
- Investment returns over time
- Borrowing costs
- Future lifestyle aspirations
- Length of time not working or earning
- Life expectancy
INCOME & EXPENDITURE
- Prepare current income and expenditure profile.
- Add savings being made from net income.
- Add desired future lifestyle aspirations (see cash flow)
CASH FLOW
- Prepare cash flow forecast that incorporates your total life progress.
- Include aspirations.
- Include inflation.
- Include savings (and any employer funded pensions)
- Include planned larger expenditure items (car, holidays, higher education etc)
ANNUALISED GROWTH RATE (AGR)
- Appetite for risk affects total returns.
- Long term investors have a greater chance of higher returns than short term investors, or investors who are spooked every time there is market upheaval.
- Your financial plan, if prepared thoroughly, will enable an accurate assessment of the AGR requirement to achieve the capital need to fund future lifestyle requirements.
- Your risk profile outcome will profoundly impact your sustainable rate of withdrawal.
RISK: APPETITE, CAPACITY FOR LOSS, SUSTAINABLE RATE OF WITHDRAWAL
- Assess appetite for risk.
- Assess capacity for loss.
- Assess rate of future withdrawals.
- An accurate assessment of the above will have a significant impact on the likelihood of success.
SUSTAINABLE RATE OF WITHDRAWAL
- General rule is that 3-4% p.a is regarded as a sustainable rate of withdrawal from a portfolio, where the intention is never to run out of money.
- However, everything is determined by individual circumstances, size of fund, timescales, and assumptions.
FINANCIAL PLAN
- Articulate your current and future aspirations (current, medium, and long term) putting in as much detail as possible.
- Compare this with your income and expenditure profile and work out if there is a surplus or a deficit.
- Make sure the plan is revised at least annually.
ASSUMPTIONS
Fair, reasonable and evidence-supported assumptions are vital for a successful outcome.
UK RPI
| Period | Average p.a. |
|---|---|
| 2000–2024 | 3.4% |
| 2008–2020 | 3.7% |
| 2020–2024 | 6.1% |
| 2024 | 3.5% |
Source: Dimensional Matrix Book 2025
RISK and AGR
Investment returns over time:
MSCI World Index (ex-UK)
| Period | Return p.a. |
|---|---|
| 1970–2024 | 14.2% |
| 2020–2024 | 13.3% |
European Small Index
| Period | Return p.a. |
|---|---|
| 2000–2024 | 7.0% |
| 2008–2024 | 6.7% |
| 2022–2024 | 2.7% |
Asia Pacific ex Japan Small cap Index
| Period | Return p.a. |
|---|---|
| 2008–2024 | 4.7% |
| 2018–2024 | 2.3% |
S&P 500 Index
| Period | Return p.a. |
|---|---|
| 2000–2008 | -3.6% |
| 2008–2012 | -1.6% |
Bloomberg Commodity Total Return Index
| Period | Return p.a. |
|---|---|
| 2008–2024 | 0.2% |
| 2000–2024 | 3.2% |
| 2011–2021 | -2.6% |
Source: Dimensional Matrix Book 2025
The above data shows just how variable returns can be, especially with high-risk assets or too much concentration into one area or asset class.
A broader range of assets classes in a manged or discretionary portfolio tends to offer more consistent and stable returns over time.
AGR
AGR requirement will be determined by individual circumstances, risk profile, time scale, inflation, level of funding. Below are indications of AGR requirement:
Let us assume an individual has savings totalling £90K & cash flow forecast indicates a capital requirement of £2M to fund desired outcome in retirement. £500 pm is the current level of funding.
| Funding period (years) | Fund value | AGR requirement p.a. |
|---|---|---|
| 40 | £1,1981,916 | 6% |
| 30 | £1,044,289 | 9% |
| 20 | £528,938 | 12% |
| 10 | £245,685 | 27% |
The greater the time scale, the greater the chance of success. Increasing level of funding makes a significant difference.
Data indicates that investment returns (growth) are 6-7% p.a. An expectation more than that, to be achieved every year, is unrealistic.
SUSTAINABLE RATE OF WITHDRAWAL
| Fund size | Income requirement p.a. | Withdrawal % |
|---|---|---|
| £2,000,000 | £100,000 | 5% |
| £2,000,000 | £90,000 | 4.5% |
| £2,000,000 | £80,000 | 4.0% |
| £1,044,289 | £100,000 | 9.6% |
| £1,044,289 | £80,000 | 7.7% |
| £1,044,289 | £45,000 | 4.3% |
OUTCOME: CONTINUED, UNSUSTAINABLE LEVELS OF WITHDRAWAL WILL RESULT IN WORSENING FINANCIAL CIRCUMSTANCES.
The above do not take account of investment returns or state pension.
