Published on: 28 July 2022 in Events
Your future, your responsibility: takeaways from our finance session with Emily Man, St. James’s Place Wealth Management
Reading time: 5 minutes and 17 seconds
This year we hosted a member session with Emily Man, Associate Partner at St. James’s Wealth Management, on financial planning for directors and freelancers and the creative industries.
Emily touched on a wide range of important areas, but all of them stemmed from one important principle, valuable to all directors: now is the time to take responsibility for your future.
Emily set out a number of key areas that are particularly important to engage with: saving for the mid and long-term, the workings of limited companies and preparing for the worst. Catch up with some of the key takeaways from these areas below.
Mid and long-term saving
- These days we are all living longer, and if you want to have a level of flexibility in later life – giving yourself a choice of whether you’d like to work or not, for example - then you need to provide this yourself.
- There are also added costs that come with living into old age. Living longer will also mean potentially paying for care – which can come to around £60,000 per year now, full time, so this needs to be considered.
- Emily’s advice is to think about a pot of half a million, as the potential growth on this pot could be around £25,000 a year (i.e. you can probably live off this for ever just by living off the interest).
- The first step towards building savings is keeping a track on your regular monthly outgoings, either through excel or by using a book-keeping app. It’s only through this that it becomes clear where there is wiggle room and what you need to do to save.
- For freelancers, Emily suggests setting up four accounts. Your current account, your rainy day account (not to be confused with your savings account – this one you can touch but you have to try not to), your tax account (so that your money is there at the time of filing tax returns – leave this in cash, do *not* invest it in the short term) and your savings account – which is for realising future goals, and this cannot be touched.
- There are three main ways to accrue the money you need for retirement and future goals. Earning it, investing directly (in a house you own or a company), or through market investment – Emily notes there is risk in investment.
- Other examples of investment that serve the majority are through your pension: (if you have one) and a stocks and shares ISA.
- When saving, one of the reasons to avoid keeping money in cash over the long term is inflation.
- Emily also stressed the importance of pension-planning. Directors, who are mostly freelancers, do not often have an employer to take care of their pension or protection, so this is a particularly urgent area to address – and one that’s widely overlooked. Emily asked attendees to consider themselves in twenty years time, and to be as thoughtful and generous to that person as they can.
- So you’re self-employed – when should you form a limited company? The answer is different for each individual – but in general: if you were earning between £50-60k a month every year, then it might be worthwhile looking into forming a limited company from a tax perspective.
- Owning IP and paying your pension out of a limited company are other potential useful reasons for forming a limited company.
- The downsides are the extra paperwork: you have an extra company tax return to fill.
Preparing for the worst
- Emily told attendees that, as hard as it is, it’s worth having a think about what would happen if you died unexpectedly. What would your dependents do if you were to die tomorrow – where and how would they live, what income would they rely on? Do they know what you would want to happen to your belongings or house? Would they know what hopes you have for their futures? All this can be covered off with the Will (and you can find out more about wills in relation to your royalties with Directors UK here). Insurance will give you peace of mind that they will be taken care of in the way that you want.
- It’s also worth seriously considering Lasting Power of Attorney. In the event of you being incapacitated for what ever reason, creating a Power of Attorney who will be legally allowed to make decisions for you will make your dependants lives infinitely easier, as they will have access to your bank accounts to pay for your care, or your bills. If you Google “Lasting power of Attorney” and HMRC you can find out all about it.
- If you were to be unable to work and your income stopped due to illness or accident you need to know what you can survive on every month. You can buy Income Protection which will give you an income (up to retirement if needed) if you are unable to do your job (through illness or accident). If unemployment were to happen then Emily’s advice would be to have at least three, ideally six, months saved in your “rainy day Account” – difficult of course, but if you want it to be a priority then you need to make changes.
We’d like to thank Emily for an informative and eye-opening session on financial planning for the future. Emily is an Associate Partner of St. James’s Place Wealth Management. For more information head to Emily’s web page or contact Emily via email at [email protected].