What to do with your investments if your circumstances change

There are lots of factors that can influence your financial situation and, depending what it is, you might need to make adjustments to your investment plan. Here are some things to consider.

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If the last couple of years have taught us anything, it’s just how quickly our financial situations can change, but it doesn’t take a global pandemic to trigger a change in your financial circumstances.

Life events like getting married, having a baby, changing jobs, or buying a home can drastically impact your financial situation, as well as more regular occurrences like receiving a bonus or pay rise.

When your circumstances change like this, it’s all too easy to adapt to your new situation without putting much thought into it. For example, you might reduce your pension contributions temporarily (at least that’s what we tell ourselves!) to account for new childcare costs or plan to use your increased monthly salary to get a new car. However, we think events like these are a great opportunity to review your financial plan.

As an online financial adviser, we know that what's best for your money will change as your circumstances do. It's important to make sure your money is always working as hard as possible, and that your savings and investments plan always reflects what's right for you. If your financial situation changes, here are a few things to consider…

Have your income or outgoings changed?

If your incomings or outgoings have changed, it's probably a good time to review your savings and investment plans.

Buying a new home or having a baby can increase your outgoings due to increased mortgage payments or childcare, for example. To combat this, you might choose to cutback elsewhere (this is a great time to review all your bills and subscriptions) or put less money into your savings and investments, but you need to be clued up on what impact that will have on reaching your financial goals, like retirement.

If your incomings increase because you receive a pay rise, promotion, or bonus, it's important that change is reflected in your financial plan and any extra cash you might make is put to good use. Putting some or all of it towards your financial goals might help you reach them a lot quicker, but a financial plan needs to be realistic, so don't forget to treat yourself too – you've earned it!

Do you need to change your approach to emergency planning or financial protection?

Life events like getting married, buying a house, or having a child mean that putting protection in place for life’s emergencies is really important. Products like life insurance or income protection can help you continue to provide for your family should you lose your income or pass away.

Changes to your outgoings can mean you may want to reduce or increase your cash buffer – we always recommend you keep 3 months’ worth of outgoings in accessible cash savings for emergencies so if, for example, your monthly car payments increase you may want to reflect that change in the size of your cash buffer.

Consider your financial goals

Financial goals are milestones or targets that you want to achieve and can look like:

• Saving for a house deposit

• Saving a nest egg for your children

• Becoming debt or mortgage free

• Buying a new car

• Retirement

We can help with defining your financial goals. Most people will have a mix of short, medium and long-term financial goals at any one time – perhaps you’re saving for a holiday while investing in your pension for example.  

We've explained how changes to your incomings and outgoings might cause you to make changes to how much you save or invest, and ultimately these changes will have an impact on your financial goals - this could mean reaching them sooner or having to slow your momentum towards your goals. It's best to get to grips with the impact changing your contributions might have to avoid any nasty surprises.

Ultimately, there can be a lot to consider when your circumstances change, that’s why we offer our investors the opportunity to speak to their OpenMoney adviser as and when they need, at no extra cost. It’s also why we’ve recently updated our Annual Review service so that it’s all automated! It only takes 5 – 10 minutes to complete, and we’ll automatically update your recommendation based on the new information you provide to us. If you’re unsure of any changes to your recommendation, you can still speak to your dedicated adviser at no extra cost too.

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