In these unsettled economic times, many people find that a sound financial plan for the future can bring great peace of mind. Planning ahead can help you achieve or maintain the sort of lifestyle you want and can help to protect and provide for family and loved ones as you get older.
But what are the key things to consider when planning effectively for your financial future? The key is to consider your own individual needs and those of your family, before committing to a strategy for the future.
Set your goals
Everyone's situation is different and goals and priorities can vary. Financial planning can incorporate many different goals including:
- Protecting yourself and your family
- Planning for retirement
- Planning for your children's future
- Making the best use of money and investments
- Making contingency plans for unexpected changes
- Making planned changes such as switching careers or moving abroad
Budget now and enjoy the benefits later
It's never too early to start thinking about the future. From pension funds and savings accounts to investments and insurance policies, there are many financial products that can bring potential future benefits. Most people have financial commitments and day to day expenses that have a major bearing on how much they can afford to pay into various schemes though.
Creating a budget can help to bring your current expenditure and spending into clear focus. Many people find this helps them to save money by identifying areas where cutbacks can be made. Once you have a clear idea of how much you have both coming in and going out, it's easier to work out how much you can set aside or invest on a regular basis.
A good budget should...
- Total all sources of income. These may include wages, income from self-employment, benefits, interest from savings etc
- Total your outgoings
- Split your outgoings into fixed and variable outgoings. Fixed expenditure in a given year could include mortgage or rent payments, regular loan repayments, insurance, energy bills (if split into regular payments by Direct Debit) and TV, broadband and telephone bundles. Variable outgoings could include grocery shopping, lunches and spending on entertainment and clothes.
- Be honest about variable expenditure, using past financial statements to get a good average
- Take annual expenses such as car tax and insurance (if paid in one lump sum) into account
If your budget shows a deficit between income and expenditure it makes sense to try to find areas where you can cut down your spending. If you are bringing in more than you spend, then that's good news. Many people like to leave a little extra in their budget to cater for occasional treats and unforeseen circumstances, but you should also be able to see how much you can afford to invest for the future.
Planning for retirement
In common with a lot of places, the UK has an ageing population. Many of us are living longer and it's certainly not unheard of for people to be spending almost a third of their lives in retirement. There are various pension, investment and savings plans available, but whichever type of provision you make for your own retirement, you should make sure that you research it thoroughly and get the best advice.
Some find that downsizing their homes and/or living expenses can sometimes free up extra resources. Others might have plans to move to their dream retirement spot on the coast or relocate abroad.
Everyone's situation will vary and what is right for one person might not be right for another. There's no such thing as a perfect one-size-fits-all retirement plan, but looking into all the options available should help to create the correct plan for you.Back to top