Financial well-being involves more than just managing day-to-day expenses.
It means deciding what kind of future you want, and setting clear and achievable financial life goals that will help you achieve it.
At Continuum we know that everybody has a different future in mind, and different resources that will help them achieve it. But the first step is to define your goals.
Define your objectives
Goals depend on your stage in life, your ambitions, commitments, and your personal finances.
In the short term, you might want to get out of debt, or find the cash for something special, like a holiday or a wedding. Medium term – 5 to 10 years – you might want to get on the housing ladder, move up it, or pay off your mortgage, and in the long term, you will probably want to look forward to a comfortable retirement.
Once you have decided on your goals, you need to decide how much each one will cost – how much wealth you will need to have accumulated for each of them.
It’s difficult to cost out some goals, particularly the distant ones. But if you can work out what they would cost today, you can make allowance for inflation, which will obviously have a greater effect the further into the future your plans extend.
Getting out of debt – all debt is a drain on your finances, and in most cases, apart from a mortgage it needs to be paid off as soon as possible.
Work out how much debt you have, and remember, the longer you take to pay it off, the more you will pay in interest.
Building a savings pot – It’s important to have an emergency fund of between three to six months of your earnings. Calculate a multiple of your current monthly income to keep safe in an easy access savings account.
Saving for a special event – a wedding, or a special holiday could cost tens of thousands of pounds. Regular saving for a few years could potentially bring that sort of figure. Saving into an ISA could mean the taxman does not take a share of the interest you earn.
Work out the cost today – and add a percentage for inflation for each year you have to wait for your special event.
Getting on the housing ladder – The average first home across the UK costs in the region of £290,000, meaning a 10% deposit of £29,000. A lifetime ISA, which attracts generous bonus payments from the government might help put that figure in reach.
Calculate 10% of the cost of the type of home you want – and again allow for inflation.
Paying off your mortgage early. Your mortgage is likely to be the biggest financial commitment you have. With careful financial planning you could shave years off it. The money that you save on interest is also likely to beat the interest you would earn on any savings account.
How much you need will depends on the size of your mortgage, and the time it has left to run.
Achieve financial security. Having a cash reserve is vital, and so is having adequate insurance protection. Having adequate insurance coverage is crucial for you and your family as it provides financial security and peace of mind, helping to ensure that in unforeseen circumstances, such as illness, accidents, or unexpected losses, you are protected from the potential financial burdens, allowing your loved ones to focus on recovery rather than worrying about the economic impact.
Call us at Continuum for help with putting all-round insurance protection in reach.
A comfortable retirement – From April of this year, there’s no limit on how much you can build up in your pension pot. Your goal can be as large as you wish! There is, however, a cap on the amount you can save every year into your pension, upon which you can earn tax relief, known as the ‘annual allowance’, which is £60,000 in the 2023-24 tax year, or 100% of your income if you earn less than £60,000. It was previously capped at £40,000. So, planning for a comfortable retirement is essential to maintain financial independence and enjoy a fulfilling lifestyle in your golden years, ensuring that you have the resources to meet your needs and pursue your interests without the stress of financial constraints.
Call us at Continuum to discuss the pension pot you need to afford the kind of retirement you want.
You can think of these goals as stops on a roadmap which leads to accumulating the level of wealth you need. This means you can include milestones – a figure showing how much wealth you should have built up year by year. This makes it easy to track your progress – and see if your journey towards wealth is fast enough.
Developing your financial strategy
With your goals and roadmap in place, it’s time to start looking at how you would reach them. It’s not enough to simply try saving in the hope you will amass enough to meet your financial objectives. You need a financial strategy.
Make sure your strategy is SMART. SMART stands for Specific, Measurable, Achievable, Relevant and Time-Related. It means you can check your progress and ensure that you are on track.
Your strategy will probably involve investment and should include the kind of investments you will make. Once you have a detailed strategy you should stick to it – although you should expect to make iterations as life changes. Set a formal yearly review to check you are on track to meeting your goals.
Getting some help
Getting an expert to look at your financial goals with you is valuable, because it will help you see how realistic they are in the time you need to take to reach them.
At Continuum we can provide that expert view, but we won’t stop there. We can help you develop your strategy, finding the investments that are appropriate for you, and in many cases can help you reach your financial goals faster.
For help setting and scoring your financial goals, call us today for a free initial consultation.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment, savings or retirement strategy, you should seek independent financial advice before embarking on any course of action.
When investing your capital is at risk
Your home may be repossessed if you do not keep up repayments on your mortgage.
Equity investments do not afford the same capital security as deposit accounts.
By incurring a Lifetime ISA Government withdrawal charge you may get back less than you paid in.
By saving in a Lifetime ISA instead of qualifying pension scheme you could lose contributions by your employer, if any.
Saving in a Lifetime ISA may affect your entitlement to current and future means tested benefits.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Pension income could also be affected by interest rates at the time benefits are taken.
Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. We recommend that the investor seeks professional advice on personal taxation matters.
https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/july2023/
