How to Create a Financial Plan

Are you feeling overwhelmed by your finances? A well-crafted financial plan can provide the clarity and structure you need to achieve your financial goals.

Whether you’re saving for a mortgage deposit or major life event, planning for retirement, or simply trying to reduce debt, a financial plan is essential. Acumen explores how to create a plan that works for you.

What is a financial plan?

A financial plan is a personalised roadmap that outlines your financial goals, current situation, and strategies to achieve those goals. Having a financial plan in place gives you a clearer route towards a secure and fulfilling future.

A financial plan typically includes the following components:

• Retirement savings: Assessing how much you need to save for retirement based on your desired lifestyle.
• Pension planning: Exploring private pension options and understanding your state pension entitlement.
• Budgeting: Tracking your income and expenses to ensure you’re living within your means.
• Debt management: Creating a plan to pay off debt and avoid accumulating more.
• Investment strategy: Selecting appropriate investment vehicles to grow your wealth over time.

The advantages of creating a financial plan

Perhaps the biggest advantage of creating a financial plan is the peace of mind that comes with knowing you have a plan in place. This can significantly reduce financial stress and anxiety, which can be invaluable.

The sooner you begin planning, the better. This is because the longer you have to save and invest effectively, the more time your investments have to grow. Compound interest can significantly increase your savings over time.

How to make a financial plan

1. Assess your current situation

The first step is to get a clear picture of your current financial situation. Monitor your expenses to understand your spending habits and identify areas where you can cut back.

Evaluate your current debt situation, including credit card balances, loans, and mortgages. Also, assess your existing savings accounts and pension contributions.

It’s also a useful exercise to define your ideal retirement lifestyle at this stage. Consider factors such as where you want to live, your desired level of comfort, and any hobbies or activities you would like to pursue.

2. Set S.M.A.R.T. goals

Once you have a clear understanding of your finances, it’s time to set goals. Use the SMART goal framework to ensure your goals are:

• Specific: Clearly define what you want to achieve.
• Measurable: Set quantifiable targets.
• Achievable: Ensure your goals are realistic and attainable.
• Relevant: Make sure your goals align with your overall financial objectives.
• Time-bound: Set deadlines to create a sense of urgency.

3. Choose the right investment vehicles

Maximise your contributions to your workplace pension, taking advantage of any employer-matching contributions, and consider opening a personal pension to supplement your State Pension.

Depending on your age, risk tolerance, and financial goals, you may also consider investing in stocks, bonds, or real estate. Our advisers can help you to determine the most appropriate investment vehicles for your situation.

4. Optimise your asset allocation

Diversifying your investments across different asset classes (stocks, bonds, cash) can help manage risk and potentially improve returns over the long run.

Consider your risk tolerance when allocating your assets. Younger investors may be able to tolerate more risk, while older investors may prefer a more conservative approach.

Many financial experts recommend adjusting your asset allocation based on your age. As you get closer to retirement, you may want to shift your investments towards more conservative options to protect your savings.

Get professional advice at Acumen

While creating a financial plan can be achieved independently, seeking professional advice can provide valuable insights and guidance that make the whole process quicker, easier and hassle-free.

A financial adviser can help you develop a personalised plan, identify potential pitfalls, and make informed decisions about your investments.

Remember, consistency is key when it comes to financial planning. A financial plan is not a one-time event. It’s a living document that needs to be reviewed and adjusted regularly.

As your circumstances change, so should your plan. Make sure to review your plan at least annually and make necessary adjustments to keep it on track.

Feeling overwhelmed by the process? Acumen’s team of experienced financial advisers and planners specialises in providing personal financial planning tailored to your unique needs.

Contact us today on 0151 520 4353 or email [email protected] today for a free consultation and start taking control of your financial future.