UK households are currently feeling the pinch as the cost-of-living crisis deepens. Not only has the price of the average food shop increased, but fuel prices are rising, and energy bills are more than doubling for some households. These represent serious challenges for younger people and families and illustrate the importance of financial planning more than ever. But what is financial planning, and when should you start?
What is Financial Planning?
Financial planning is a roadmap to help you navigate life while saving enough money to afford the big things and retire comfortably. It encompasses your life ambitions and current financial situation, helping you plot a route through to major milestones without burning through your assets. Far from being a haunt of the wealthy or shrewdly invested, planning finances is crucial for all, especially in today’s complex financial landscape.
When Should I Start Planning My Finances?
It should be undertaken at the earliest possible convenience. The earlier you plan, the better the outcomes you can expect to achieve. This may be demoralising, especially for those with no formal or informal financial plan. However, as the saying goes: “the best time was years ago; the second-best time is right now.”
Stages of Planning
The initial focus of any financial plan should be on your current financial situation and some general short- and long-term goals. For example, you and your partner may have a collected annual income of £50,000 and might have hopes of buying a first home in the next two years. You might also hope to set some initial goals for a retirement fund. Your financial plan begins with these ambitions, prioritising the putting-away of money for a house deposit within your budget.
With an initial plan underway, you can now begin to build a more robust plan for the different stages in your life. In your 30s, you may be thinking about starting a family and moving to a family-friendly home; your 40s and 50s might be concerned with maximising your pension contributions and investment portfolio, with your 60s given to retirement preparation.
How to Get Started
Even the most basic financial plans can be a daunting prospect to begin appropriately, especially with complicated income and expenditure streams and any additional debt you may be liable for. A conversation with a financial adviser can help you make sense of the process and some of the critical mechanisms by which financial planning can save you money and earn you money in the process.
Ed took a keen understanding of business through his studies and early business ventures. He now looks to advise start-ups and is extremely keen to make sure every entrepreneur gets the advice which could make their business venture a success. He has been a guest author on various high authority business sites.