10 ways to plan for a better financial future

11 January 2022

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Taking steps to safeguard your financial future doesn’t need to be an intimidating task. Small changes now can have big pay offs later on and by following these 10 tips, you’ll be well on your way to protecting yourself for the year ahead and beyond.

1. Start with your yearly budget

One of the first things you should do when it comes to financial planning is setting out a clear budget. Admittedly, budgeting isn’t very exciting but the process can help you pinpoint lifestyle changes you need to make in order to grow your savings and become more financially stable. The key is to live within your means and calculate how much you could save on a weekly, monthly or yearly basis. As a general rule of thumb, you might want to follow the 50:30:20 rule, whereby 50% of your income goes towards necessities, 30% for things you want and the remaining 20% into savings.

2. Calculate your outgoings

It’s unlikely you’ll be able to keep receipts for everything you’ve purchased, however it’s important to at least keep track of your monthly spend on essentials and luxuries. Then there are two questions you’ll need to ask yourself when it comes to expenses: have you stayed within your budget and how much have you managed to save? If you find you’ve answered no and nothing to these questions respectively, you’ll need to pinpoint what unnecessary purchases threw you off-track. There are some great financial apps you can use to track your incomings and outgoings on a daily basis and remember, small sacrifices now will go a long way towards safeguarding your future.

3. Review your short, medium and long-term financial goals

When thinking about financial changes you could make, you should also review your overall living situation at the beginning of every year. What’s new in your life? Have your financial goals changed? And more importantly, are your current investment strategies working? If you’re not where you’d like to be financially, you’ll need to do some tweaking. New goals need to be achievable and managed properly, so have a conversation with a financial adviser before making any drastic changes.

4. Reassess your attitude to risk

When it comes to managing your investments, attitude to risk is key. Are you as bullish as you were 12 months ago or a little more risk averse? Think about how your risk appetite is aligning to your goals and if you identify a disconnect between the two, consult your financial adviser. It might be necessary to restructure your investment portfolio and inject some new life into your investments and a financial adviser can guide you through this process.

5. Grow your savings

If you haven’t started saving yet, start immediately. Savings are key to financial stability so don’t wait until you need, because by then it’s too late. There’s no ‘right’ way to manage a savings account but you should check how much you’re putting away at least on a monthly basis. Many people wait until it’s almost too late to start saving for their desired retirement pot, some try to overcompensate and save large amounts in a short space of time. Be sensible and avoid squirrelling away more money than you can afford. Similarly, when it comes to longer-term savings - like your pension – bear in mind that building up the pot should be a marathon, not a sprint.

6. Safeguard your personal, family and business protection

Life comes with all sorts of risks and it’s important to check whether you have prepared yourself and your family for sudden circumstantial changes. You may find for example, that your Life Cover arrangements would not be sufficient if you could no longer work. In this scenario, you should think about amending your plan to safeguard your family and ensure they can continue living comfortably. Furthermore, business owners have their own risk factors to consider, such as the consequences of losing a key member of staff. In this case, you need to check that your business insurances would cover the losses incurred by absence or recruitment replacement.

7. Take into account any life changing events

As well as planning for the worst, you’ll also need to think about how other - more positive - life changing events will affect your short and long-term finances. Such events could be any number of things - including marriage, a pay increase, the birth of a child or starting a business. When this happens, you’ll need to let your financial adviser know so they can help review the potential impact these changes might have on your current investments. Amongst other things, you’ll need to reassess your ability to build wealth, plan for retirement and capitalise on tax and insurance related benefits.

8. Establish a repayment plan for any debts and claim potential credit

If you’ve accumulated debt over the years, you’ll need to make sure you have a repayment plan in place. You should pay off debt encumbered with high interest rates – such as credit card, holiday payments and personal loans - sooner rather than later as missing even just one payment can snowball. There are other benefits to keeping on top of your repayments as well; for example, some credit card companies offer claim back rewards in the form of points, cashback or vouchers. And if you’re looking to take out a loan in the new year, you must ensure you have a healthy debt-to-income (DTI) ratio and credit score.

9. Invest in your financial knowledge

Having a broader knowledge of investment landscapes and financial markets could make you more financially savvy. You should aim to read up on at least the headline news stories about inflation and current market behaviours, as these factors affect your savings. Fund managers like BlackRock and Fidelity even have weekly news sections on their websites that are relevant to investors. And in the digital age, research doesn’t necessarily mean sifting through mountains of books. There are plenty of money experts creating podcasts and using media platforms like YouTube and TikTok to breakdown complex technical and financial concepts.

10. Seek the advice of a financial adviser

Planning for the next 10/15 years takes time and effort, particularly if you have a complex goal in mind; such as taking on a mortgage or opening a self-invested personal pension. While some people are fully equipped to manage their own finances, the vast majority will need guidance at some point. A financial adviser is best placed to give professional advice on these matters and what they have to say can be invaluable. If you already have a financial adviser, you should have a check-in with them at least once or twice a year so they can review your strategy and ensure it’s still working for you.