You can't afford not to plan your finances!

by John Fitzsimons on 19 November 2010  |  1 comment
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Guest blogger Sue Whitbread, of the Institute of Financial Planning, explains the importance of getting your financial plans in order

Guest blogger Sue Whitbread, of the Institute of Financial Planning, explains the importance of getting your financial plans in order

Do you find it’s easy to live life day to day without thinking about what the future holds, and what you really want out of life?  It seems that many people do. The Institute of Financial Planning (IFP) is urging people to take this opportunity to improve their “financial fitness” with its Financial Planning Week campaign (www.Financialplanningweek.org.uk). This dedicated website provides useful tips and tools to help you to take more control of your finances and your lives by using simple planning techniques.

Sorting out your goals

So often when we think about our finances, we start off by thinking about things like investments, ISAs, pensions, insurance etc. Of course, these are all important, and you may be thinking that you’ve got this all sorted out.

However, it’s almost like deciding on medical treatment before you know what condition you’re being treated for. Don’t forget the all important first step which is working out what we actually need our money to do for us – our goals. Designed especially for Financial Planning Week is a great DIY guide to Financial Planning written by Jane Wheeler, a Certified Financial PlannerCM professional. Check it out to make sure that you’re approaching your finances in the best possible way to achieve what you want in life. It’ll really make you think.

Get financially healthy

Once you’ve got your goals sorted out, the next task is to see what’s your overall financial health is looking like? This financial healthcheck calculator from money made clear is a really useful tool for getting that overall perspective that is sometimes easy to overlook.

Financial Planners regularly recommend that you accumulate at least three months income into an instant access account for emergencies.

Want to see how much you’d have to put aside to build up three months income? Check out this savings calculator  - but don’t be deterred. If it sounds a bit daunting, you can speed that up by making greater savings in other areas of spend.

With lots of uncertainty around job prospects and also the likelihood that prices will continue to rise next year for lots of key areas of household spending, getting a bigger cash cushion in place quickly is something that will make you feel much more in control of your life. With interest rates at record lows, it’s all the more important to shop around to get the best interest rate you can on your savings  too - as these days loyalty just doesn’t pay!

Drawing up a budget

Drawing up a budget and sticking to it is at the heart of all good financial planning, but especially so with the cost of living looking set to continue rising in 2011. Why not try an online budget planning tool? This one is easy to use and really makes you think about what you spend your money on each month. The more you can control it, the more scope you’ve got to save money to meet those all important goals.  

Want to go a step further? Then this financial planning tool is a basic version of software used by many professional financial planners. The results may be scary but it’s a great way to help you map out your financial future, and help you check whether you’re on track – or not – to meet your goals. 

You get your car MOTd each year, and may even get your teeth checked every six months, so make sure you apply the same annual checks for your finances – and your life - too. Whether you use a spreadsheet or a notebook, write everything down and monitor it regularly – at least annually, but maybe more frequently in the early stages.  Keeping on top of your goals and your finances is a habit that will put you in control of your life and give you real peace of mind.

Sue Whitbread is Communications Director at the Institute of Financial Planning