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UK Financial Adviser

Whatever your age...the importance of making an
Annual Financial Plan

Even if you feel fairly confident about the way you’ve been handling your finances so far, understanding how you can use an annual financial plan to your advantage can help you make smarter decisions with your money going forward.

Your starting point may differ depending on your age, income, debts and assets – however the most important components of an annual financial plan are the same. This is what you need consider when making your annual financial plan:

Life Events

Reaching certain milestones, such as getting married or having a baby, are obvious reasons to reshape your financial plan. For example, a twenty-something my want to focus on saving for a deposit on a first home, while a young family may want to look into the future to save up for their children’s schooling or university.

Retirement and Investing

Reaching certain milestones, such as getting married or having a baby, are obvious reasons to reshape your financial plan. For example, a twenty-something my want to focus on saving for a deposit on a first home, while a young family may want to look into the future to save up for their children’s schooling or university.

Actually, saving for retirement should be a top priority at any age; however, this gets pushed to the back burner far too often. By saving for your retirement in an ISA or a pension plan you can enjoy real tax advantages. If you’re not able to save in an employer-sponsored retirement account, a stocks and shares ISA is an option you can consider.

  • A general rule of thumb is a percentage of salary equal to half your current age if you want to have half your salary paid as a pension by your mid-60s. 
  • A 20-year-old needs to save 10% a year, whereas someone starting to save at 50 would need to put aside 25% of earnings on a regular basis.

Read those two lines again… A bit daunting given other demands on income.

Saving for emergencies

Again the general rule of thumb for an emergency plan is 3-6 months worth of expenses in that ‘rainy-day-fund’. If you don’t have an emergency savings buffer yet – or yours isn’t as big as you’d like it to be – then starting one or beefing it up are items you should add your financial to-do list moving forward.

Work on building Alternative Income Streams

Developing an additional income stream for retirement beyond tax-advantaged and taxable investment accounts is a must. Investing in a rental property and becoming a landlord can provide regular income if you’re concerned about not saving enough for your later years. Looking for ways now to maximize your income later is a must.

Saving Goals

Your annual plan should include your outlook on the future – What do you want to accomplish in the next 12 months? With regards to what you want to save and where you should be putting that money. By starting with the total amount and then breaking it down in a monthly or weekly basis can make achieving your goal easier.

In Conclusion

Creating an annual financial plan may be time-consuming and may require you to face up to some financial realities that you’ve been avoiding, but it is well worth it in the end. Once your plan is completed, you can begin taking specific steps to ensure that your financial house is in order and running smoothly.

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