Creating your financial plan will help you see the bigger picture and set life goals, which are crucial for mapping out your financial future. When you have a financial plan, it’s easier to make financial decisions and stay on track to achieving your goals.
Robust and practical financial plan
Everyone’s situation is unique, but creating a coherent, robust and practical financial plan is crucial if you want to take control of your financial future. We often meet people who suddenly realise that they took their eye off the financial ball.
When this happens, the impact of an unexpected situation or emergency can be much more intense, because there are money issues on top of a very stressful situation. So we look objectively at your plans to provide solutions that work as your priorities change over the years.
Time out to consider your financial position
Procrastination is the greatest enemy of achieving financial independence. Creating your financial plan doesn’t have to be a daunting process. It is more about taking the time to consider your financial position and what changes you need to make. And it’s built on a close analysis of your entire financial position, requirements, prospects and objectives.
The first step is to identify your financial goals in the short, medium and long term. This could include buying a property, paying off the mortgage, retiring by a certain age or setting up your own business. There is no right or wrong financial goal – they are unique to you and what you ultimately want to achieve.
Meeting your needs today and in retirement
A financial plan will help you meet your needs today and in retirement and help protect you from the unexpected along the way. It includes the right mix of savings and investments and insurance protection products to help you meet your financial goals.
Once you have identified your financial goals, it is important then to consider your current financial position. What assets and liabilities do you have, and what is your income and expenditure? You need to determine how much can you afford to save or invest on a regular basis to assist in achieving your goals.
Establishing the plan
Once you have determined your current position and your goals, the next stage is to develop your plan. Creating your road map will help you understand the financial structure you need in place to achieve your goals and reach each destination successfully. Any effective plan also needs to have tax planning as its foundation.
What should you consider for your financial road map?
Where do you want to be or expect to be in 10, 20 and 30 years? Remember that you may be living in retirement longer than you think.
Your emergency fund
How do you plan on paying for unexpected events such as a career break, an extended illness or a job loss?
People are living longer, so there’s a chance that you could be living into your 90s. Be optimistic. How much money will you need?
Consider the kind of lifestyle you have now and think about what you will want or need later on. How much will this lifestyle cost?
How will you keep safe all that you hold dear if you were to die unexpectedly? What would happen if you were diagnosed as suffering from a serious illness? Could you continue to pay the bills?
Your current savings plan
How much money are you saving now? Is it enough to help fund your future short, medium and long-term goals? At what point do you expect to start using your savings for living expenses?
Your level of investment risk
Are you comfortable with the level of risk you’re taking with your investments? Does it need to change to better reflect your own situation or the state of the economy?
Your income in retirement
Take a look at any income you may have in retirement. Are you ready for life beyond work? How much money do you need to retire? How long will your money last? How much will you need to spend?
Your estate plan
More than a Will, an estate plan can ease the burden on your loved ones, ensure your assets are distributed as you wish, reduce taxes, and plan for future personal care and health care needs. How do you want to pass on your wealth?
Review the plan
Effective financial planning is about much more than simply coming up with an initial strategy. Regularly going back to your plan and reviewing it is crucial to ensuring it remains suited to your needs and aspirations. As with all of life’s plans, things can go awry and opportunities can present themselves.
Finding time in our busy schedules to review our financial plans is not always easy. You should review your plan at least annually, or when your circumstances change, to ensure that you remain on course to meeting your goals. It’s also a time for reviewing the performance of your investments and changing these where appropriate.