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How to create a robust financial plan for 2020

How to create a robust financial plan for 2020
January 31, 2020 Amy Cooper
financial plan

Getting your finances in order and saving for the future is a New Year’s resolution for many, but starting and sticking to it can be difficult. In this article, George Square Financial Management provides some top tips on how to create a robust financial plan for 2020 and beyond.

No matter the size of your income, financial planning is essential. Designed to help secure your financial future, a financial plan seeks to identify your financial goals, prioritise them and then outline the exact steps that you need to take in order to achieve them.

There are a number of ways to maximise the success of your financial plan. These include:

1. Be specific about your objectives

When setting your financial goals, it’s important to have a clear objective. Firstly, you need to be crystal clear about what you are saving for. This could be anything from planning for your children’s education or for your retirement to a dream holiday or a property purchase.

Once the objective is clear, you can then assign a monetary value to that goal and a set time frame that you’d like to achieve it by. It’s important to keep your goals realistic and attainable.

2. Have short, medium and long-term goals

The approach towards reaching your various financial goals will not be the same. For this reason, it is advisable to split them into short, medium and long-term time frames.

Any financial goal due within a five-year period should be considered short-term. Medium-term goals are typically based on a five to ten-year time scale, and anything over ten years is classed as long-term.

Dividing goals into short, medium and long-term categories can help you when deciding what the right savings and investments approach is. This will involve looking at what large purchases you expect to make, such as purchasing property or renovating your home, as well as considering the later stages of your life and when you’ll eventually retire.

3. Always account for inflation

Whenever you are putting a monetary value to a financial goal that is far away in the future, it’s important to know the inflation rate. If you’re saving or investing, it will make a big difference to whether or not you make a profit in real terms (after inflation).

Some people stick to the ‘Rule of 72’ to determine, at a given inflation rate, how long it will take for your money to buy half of what it can buy today. The ‘Rule of 72’ is a method used in finance to quickly estimate the doubling or halving time through compound interest or inflation respectively. Simply divide 72 by the given interest rate, or inflation rate, to find the number of years in which you would double or halve your money.

4. Check you’re using all of your tax allowances

With tax rules subject to constant change, it’s essential that you regularly review your own and your family’s tax affairs and plan accordingly. You may be worried about the impact that rises in property values are having on gifts or Inheritance Tax, how best to dispose of shares in a business, or the most efficient way to pass on your estate.

Utilising your tax allowances and reliefs is an effective way of reducing your tax liability and making considerable savings over a lifetime. The UK tax system is complex, and its legislation often changes. With this in mind, it’s more important than ever to be tax-efficient, particularly if you are a higher rate taxpayer, to ensure you don’t pay any more tax than necessary. George Square Financial Management can advise on all areas of tax planning. If you’re concerned that you aren’t making the most of your tax allowances, please get in touch and we can help accordingly.

5. Identifying your retirement freedom options

Retirement is a time that many look forward to, where your hard-earned money should support you as you transition to the next stage of life. The number of options available at retirement has increased with changes to legislation, which have brought about pension freedoms over the years. The decisions to make regarding how you take your benefits may include tax-free cash, buying an annuity, drawing an income from your savings rather than a pension fund, or a combination.

Beginning your retirement planning early gives you the best chance of making sure you have adequate funds to support your lifestyle. You may have several pension pots with different employers, as well as your own savings to withdraw from.

6. Monitoring and reviewing your financial plan

Finally, there is little point in setting goals and never returning to them. You should expect to make alterations to your plan as life changes. Therefore, setting a formal yearly review, at the very least to check you are on track to meeting your goals, is advisable.

Get in touch

At George Square Financial Management, we can help you to create a financial plan, monitor it, and make adjustments as your goals, time frames, or circumstances change. We can provide an objective third-party view, as well as the expertise to advise you with financial planning issues.

For a free initial consultation with one of our expert financial advisers, call the George Square Financial Management team on 0115 947 5545, or send an enquiry here.