To many people, financial planning sounds like something only for the very rich – the wealthy taking their piles of money to someone who tells them where to invest it. In fact, financial planning is about setting long-term and short-term financial goals and developing a plan to achieve them. It’s about making the most of your money, whether that’s putting a little extra into savings one month or paying off debt more quickly – so your money works for you as efficiently as possible while reducing your financial stress. In short, it’s something everyone can benefit from.
Your goals
Financial planning starts with understanding your current situation – your assets, debts and spending – and defining where you want to be. What do you want to spend on in the next year? Where do you want to be in five years? Any major expenses on the horizon? When do you want to retire, and how much do you need to save? Setting out your immediate, medium and long-term goals is one of the first steps, and these vary with your age, financial circumstances and life circumstances.
Your plan
Your plan is how you get from where you are to where you want to be. You’ll decide how much goes into savings and how much pays off debt, set a realistic monthly budget and consider whether you can invest. Understanding where your money goes helps you make better decisions and be realistic about your goals. People without a plan tend to spend more than they need to and end up with little saved; people with a plan find it easier to save and pay down debt.
Your financial planner
A financial planner can help you set goals and work out how much to save to be secure into retirement. They help you understand your finances, boost your savings and potentially reduce your tax. They’ll keep you accountable, and if your circumstances change, help you adapt. If you’re looking at investing, they’ll help you make the most of your investments and see how each type fits into your plan.
Final thoughts
A financial plan helps you set goals, save money, order your finances and reduce financial stress – the difference between barely getting by and being financially secure. It doesn’t matter how much you earn: whether it’s saving for retirement, deciding which debt to pay first, or working out whether you can afford a holiday, a planner can help you make the best decisions with your money.