It is no surprise that those who spend time giving consideration to their financial affairs go on to have a more prosperous future
Planning and setting aims and objectives goes a lot further than merely assessing income/expenditure, but your wider tax position, diversification of assets, tax wrappers and their underlying investments all need to be considered.
Regular reviews of your affairs can really help satisfy some of those key targets we all have:
1. Wealth preservation and growth
The overarching one to begin. The one that all the other points add together to form.
For many of us, paying off the mortgage is priority number one, as our home will be one of our most significant assets.
Over time, families will grow along with the need for more space, a bigger car, funding education, those family holidays – amongst many other things along the way.
As you would expect, this all requires more wealth and higher incomes, and having a plan can help preserve and grow your wealth and making these targets much more achievable.
Whether it be seeking greater growth for your cash savings through investment, or regular reviews of your mortgage or your other borrowings, it all makes those goals more realistic.
2. Raising a family
It is often claimed that raising a child is more expensive than buying a house.
With the less predictable nature of raising a family – you know what your mortgage costs for the next “x amount of years” – then a plan is fundamental in terms of short term and longer term savings.
What schools are they likely to attend and whether university is on the horizon, whether they are involved in clubs or teams, or the school is fee paying – all areas that can affect a family’s financial position.
3. Retirement
Whilst throughout our working lives we have that income coming in, not many of us want to work forever!
Plans may well differ between individuals, but with life expectancy increasing and the State Pension Age seemingly getting ever further away for some, retirement planning is a crucial part of financial planning.
Retirement planning sits nicely alongside wealth preservation and growth, as throughout our working lives, regular contributions to pension schemes and other savings vehicles such as ISAs will lead to you being able to enjoy a long and prosperous retirement.
In most cases, the growth achieved on the underlying investments forms the majority of the ‘pot value’ come retirement. Why leave this to chance, when having a plan and regular reviews can ensure that the pot is invested appropriately.
4. Protection
What is our single most important asset? A regular question, with many differing responses.
Your health is required in order to achieve a lot of those targets we set out in life. Term assurance, Critical Illness, or Income Protection contracts can all offer a level of protection that means that all of those key targets could still be achieved in a worst case scenario.
Yes, many of us will encounter problems and unforeseen circumstances along the way, so protection will and should play a key part in your financial plan.
Tomorrow: How to create a successful financial plan
