Back to the basics of financial planning

Posted on: 25 May 2012 by Donna Hansen

Donna Hansen highlights the importance of understanding your outgoings and budgeting effectively as you plan for retirement.

Financial planningISAs, SIPPs, SSASs, VCT, EIS…  It's enough to make your head and eyeballs spin. Judging by the amount of acronyms the financial services has, there's some justification of the view that the industry is awash with abbreviations and jargon.  No wonder it's easy for people to view financial planning as over-complicated.

So let’s strip away the unnecessary complications and get back to basics for a bit.  Financial planning is about just that – planning.  A decent  structure is the basis for a secure future and it really is quite simple.  The key to financial planning is to provide security, whether it’s a specific security for your family, should the very worst happen and a breadwinner is taken out of the picture, or the general security of knowing that there is something to fall back on should plans not work out. 

Financial planning is also about accumulating capital and securing it ready for use when you need it. Having plans in place and the capital to carry out those plans can give you great  peace of mind. A large part of financial planning for many of us is about building up an amount of money so that we have the means to enjoy a comfortable retirement when the time comes to stop working.

So, how do you get to that stage - with financial plans in place and a variety of eventualities covered along with a financial 'safety net'?  It's a process, take it step by step so it's not an overwhelming task. There are many aspects of financial planning you can do yourself, along with some we'd recommend you take independent financial advice about.

Your first step is to get on track with your current finances.  Sit down with a budget plan and work out exactly (and we don’t mean roughly with lots of zeros at the end of the numbers where you have taken a guess at it) how much comes in each month and how much goes out.  This sounds very simple, but as most of us now tend to pay for almost everything on a card, be it debit or credit, it can be difficult to keep track of spending.  

As accurately as you can then, write down everything you spend and just for a month, try an experiment - withdraw a chunk of cash and try to live off that ONLY.  It might be old-fashioned but as road tests by some of Worldwide's staff show, it can really work.  Handing over notes and seeing the contents of your wallet depleted really does make you realise what you’ve spent.  

After that, work out how much you pay each year on things like running your car, Christmas, household repairs, vets bills etc. then break it down into monthly amounts and put aside money for them. To make this easier, there are some banks which will allow you to have a “master” savings account and then you can name separate pots of money, a bit like saving in jam jars, but more secure! At the start of the month, put that away and then when the bills come in, you won’t be walloped by them.

If after this you're still feeling daunted, there is plenty of help at hand. Even if you're feeling confident about your budgeting, consider taking some independent advice to see what else you could be doing to plan your finances for the future. 

Arrange a meeting with an independent financial adviser who can help you with the budget planning and advise you on what you need to do to make sure you're secure and they'll help you get there.  

Security and peace of mind are priceless.  Often people worry about the cost of such a meeting but you will usually have a free initial consultation where the costs of any further advice you need will be explained fully to you and it's up to you to take it up or not. 

If you would like a free budget planner, call Donna Hansen on 0845 230 9876, e-mail or take a look at our website

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