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5 Ideas to get more financially organised

Financial planning can seem overwhelming. There are several different factors you need to consider and some of these, such as pensions, investments, and tax can be complex.

Financial planning can seem overwhelming. There are several different factors you need to consider and some of these, such as pensions, investments, and tax can be complex.

But for most people, financial planning does not need to be excessively complicated. If you put a few simple structures in place you can become more financially organised, and well on the path to achieving your goals without feeling like you are really trying.

1. Make a budget

To organise your finances, you need to understand how much money you have to work with. Spend some time going through your bank statements and
make a list of:

  • Net monthly salaries
  • Self-employed earnings – don’t forget to account for taxes.
  • Any other regular or ad hoc sources of income
  • Monthly bills
  • Essential regular spending
  • Ad hoc expenditure
  • Discretionary and luxury spending

If you are earning more than you spend, you can put the surplus to good use. If you have a shortfall, you may need to think of ways to cut back or earn more money.

2. Create a cashflow plan

A cashflow plan can allow you to plot different scenarios and decide how much to spend and save. It can also help you make decisions over how much you need to earn, when you can retire, and how much investment risk you should take. You will need to make a number of assumptions to create your cashflow plan, including:

  • How much you are likely to earn throughout your lifetime and whether this will change.
  • How much you will spend, including the impact of inflation.
  • The level of investment growth you are likely to achieve.

All of the assumptions will be wrong, but the idea is not to predict the future. It is to model a scenario which can be adjusted over time as things change. You can create a simple cashflow plan yourself using a spreadsheet or online calculators. Alternatively, a financial adviser can construct a detailed model for you, incorporating multiple assumptions and scenarios. This can help to inform any further financial decisions you will make.

3. Automate Your Finances

Many of us know we should be saving more, investing more, or paying off debt. But relying on our future selves to deal with these things just leads to procrastination and delays. Inevitably, if there is money available in your bank account, there is a good chance you will spend it.

To give yourself the best chance of achieving your goals, the following may help:

  • Set up a regular standing order or direct debit into your savings account to ensure you build up an emergency fund. Ideally you want to keep a cash reserve of at least 6 months’ expenditure.
  • Do the same thing for pension and investment contributions.
  • You may also be able to arrange annual increases to your pension contributions. If you increase your payments by, for example, 5% per year, you will barely notice, but the benefit will be significant.
  • Make regular overpayments to reduce debt.
  • Future-proof your protection policies by selecting plans with regular increases or the option to up your cover when certain life events occur.
  • Set up annual reminders to review insurance policies and shop around for the best deals.

Many banks and investment providers offer automation tools and there are numerous apps that can help with this. It might take a bit of time to set up, but once it is done, you no longer have to think about it. The more good habits we can create without having to actively make decisions, the more likely we are to be successful.

Invest for Any Eventuality

There is so much noise and distraction around investing that it can seem impossible to get started. The media is full of speculation around investments, inflation and interest rates and stock tips change on a day to day basis. If you were to follow every piece of advice and try to manage your investments with the changing market, you would not
have time for anything else. A good investment plan has the following features:

  • It invests in a wide range of asset classes across multiple regions and sectors. Rather than choosing what to invest in at a given time, it is more efficient to capture as much of the market as you can.
  • It takes an appropriate amount of risk depending on what you want to achieve and how much volatility you can cope with.
  • It aims to cut costs and seek value for money. Consolidating your investments can help with this, as well as reducing the amount of admin required.
  • It aims to invest throughout the ups and downs rather than timing the market or following emotion and bias. The right investment strategy works in all markets and does not need to be adjusted unless your circumstances or requirements change.

Review Regularly

Getting financially organised does not mean that you never need to think about your finances again. Your circumstances will change and the market will fluctuate. You might need to save more or adjust your investment strategy. But if you take the time to get organised now, regularly reviewing your plan will be a breeze.

One of the benefits of working with a financial adviser is that they will hold you accountable for reviewing your plan and staying on track.

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The information contained within this article is for information purposes only and does not constitute investment advice. It is not an offer to purchase or sell any particular asset and it does not contain all of the information which an investor may require in order to make an investment decision. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.

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