Whether you’re putting a personal financial plan together for the first time or you want to revisit your strategy, here are a few personal financial planning tips to help you secure your future.
Assess Your Current Financial Situation
Before embarking on your personal financial planning journey, you’ll need to conduct a thorough analysis of your present situation.
The better you understand your circumstances, the easier it will be to plan and budget accordingly. Working out your net worth or pinning down the value of your assets and liabilities can be a little more challenging for those with more complex financial affairs – for example, if you’re a shareholder in a business or own a large investment portfolio.
Are your Books in Order?
Staying on top of your books is vital if you want to understand your finances. By keeping detailed, accurate and up-to date financial information on file, you’ll find it easier to see where your money is going and what you should focus on in the future.
Review Your Budget
A crucial piece of the goal-setting puzzle is your personal budget. Your budget should align with your current circumstances and financial goals. Think about what you’re spending now, how much you’re earning and how much money you need to save to meet your goals.
If you want everything to go to plan, you’ll need to create a realistic personal budget that aligns with both your current circumstances and financial goals. Look at your past financial data to understand how you usually spend money and identify areas to cut down on.
Optimize Your Tax Strategy
Your tax strategy is an important part of your personal financial planning. By minimising your total liabilities, you can retain more of your hard-earned income to meet your personal goals.
Work with an accountant to devise a tax-efficient plan that ensures you pay the right amount of tax – no more, no less. In the short term, this could include maximising reliefs on your self-assessment tax returns or timing the sale of property correctly to defer your capital gains tax payments.
More long-term tax strategies could include setting up a trust to protect assets or an estate plan that helps you pass your wealth onto the next generation.
Do you have an Emergency Fund?
Unforeseen circumstances can disrupt even the best-laid plans. If you fall on hard times, an emergency fund acts as a financial safety net.
The exact amount you’ll need to save will depend on your unique circumstances, but you should aim to put enough money aside to cover a few months’ worth of living expenses. If you can afford to build up a fund, this can save you a lot of stress in the long run. Take a look at our blog on building an emergency fund here!
Address Outstanding Debt
If you have any outstanding debts, addressing them should be a priority. The longer you leave bills unpaid, the more interest you’ll accrue. To create a repayment strategy that will help you to pay off your existing debts, evaluate and organise them based on their urgency and interest rates.
Funding your goals
Personal financial planning isn’t just about scrimping and saving; it’s also about ensuring you have the income you need to achieve your short-term and long-term goals.
In some cases, it may help to explore opportunities to boost your income, such as taking steps to grow your business or expand your investment portfolio. Although no investment is entirely without risk, diversifying your income streams can help you boost your personal wealth while safeguarding you against financial pitfalls.
Talk to an Expert
As accountants, we can use our expertise to draw up a cost-effective strategy that helps you achieve your goals and strengthens your personal finances. We can also offer specialist personal tax advice on how to minimise your tax bill so you can retain more of your hard earned income.
If your circumstances change or new legislation affects your strategy, we’ll help adjust your budget and tax plan accordingly to give you the best chance of success.
Get in touch to discuss your personal financial strategy! And don’t forget to follow us on LinkedIn for daily business and accounting updates!
