8th April 2021
A financial plan can take many forms, but the main purpose is to help you take control of your future. Your plan should:
There are 7 key areas that should be addressed in any successful financial plan.
1. Goals and Aspirations
A financial plan only becomes tangible once you are actually working towards something. Before you start with the more practical matters, you should think about what is really important to you.
Is your main goal a comfortable retirement? Moving to your dream home? Helping your children onto the property ladder?
Write them down. There is no limit to the number of goals you should have.
Once you have worked out your goals, consider the order of priority. Some will be realistic and achievable, possibly even in the next few years. Others may require a little more work and be further in the future.
If something is really important to you, write it down, even if it doesn’t feel particularly realistic at the moment. You might surprise yourself with what you can achieve when you have something to aim for.
2. Cash Management
Keeping enough cash can help to ensure that your financial plan stays on track. As a minimum, you should have:
Having a cash reserve means that you can cope with any unforeseen events without the need to dip into your investments or go into debt.
3. Planning for the Worst
What would happen if you became ill and were unable to work? Could your family still pay the bills if something happened to you? Are your goals still achievable even if the unexpected happens?
We can’t plan for everything, but we can help to reduce the financial impact of tragic events. For example:
Protection is a vital component of any financial plan.
There are different kinds of debt.
A mortgage can help you buy a property that will hopefully grow in value and provide you with security. Similarly, a student loan is an investment in your future.
Consumer debt is usually more expensive, short-term, and doesn’t contribute to your long-term goals.
A financial plan can help you to understand the difference and prioritise which debts should be repaid first. Or if other needs, such as paying into your pension, should take priority.
5. Investment Strategy
Your investment strategy is an integral part of your financial plan.
Before deciding on an investment strategy, you will need to consider the following:
The answers to these questions can help decide the best asset allocation to achieve your goals.
A good investment strategy:
6. A Plan for Retirement
While retirement is just one goal in the course of a lifetime, it is possibly the one that requires the most planning to achieve. Your financial plan should lay out the key steps in preparing for your retirement, including:
7.Leaving a Legacy
Your financial plan should also include provision for what happens to your assets when you are no longer around, or when you cannot make decisions for yourself.
While this will require legal advice and a number of other documents, your financial plan can help to lay the foundations, address what is really important to you, and guide you in making other decisions.
Your plan should cover:
If you have all 7 areas in hand, you will have the best chance of achieving your goals.
Remember, your financial plan is not a static document that you can refer to once and ensure financial security for life. It is a moving picture that needs to be consulted, refreshed, and tweaked regularly. Your circumstances will change over time and your investments will fluctuate in value. Regular reviews and sticking to the plan are just as important as creating it in the first place.
Please don’t hesitate to contact a member of the team to find out more about financial planning.