Over our last few blog posts, we’ve looked at how you can carry out a review of your finances, refresh your budget and de-clutter your financial products. Now it’s time to set some goals.
Once you've gotten to grips with your current financial situation, you're ready to look to the future. Goal setting helps you set reasonable expectations for your money month to month. It's also a fantastic way to help you focus on what really matters: where should you spend and where should you save?
Making sure you're prepared for the future is a vital part of a good financial wellbeing. Here are some handy tips to get you started.
Everyone has to start somewhere. Small, achievable targets are a good way to get going.
We don’t just need savings for later life, we need to get into good habits for our day-to-day too, as well as preparing for unexpected expenses. Diving straight into planning for the next 50 years is pretty daunting. You may find it a lot more beneficial to break things down into smaller, more concrete goals first.
Start with achievable one, five and ten-year plans. Look at your outgoings and what you can afford to save into each and put that aside into a savings pot. There are a bunch of great apps and services to help you do this.
It might be easiest to have a pot linked to your current account, or you may want to make it less accessible and set up a standing order into a different savings product. Either way, separating things out into individual pots, each with a clear purpose will mean you're prepared for the medium and long-term.
It's easy to ignore debt as a 'temporary thing' when looking forward for our finances. However, with out a realistic plan to deal with it, it can quickly become a problem.
The thing to remember is this: Don’t ignore debt, but also don’t make it a dirty word. Once you’ve made sure you’re not paying over the odds for the debt you have, and that you’ve worked out manageable repayment over a set period of time, you can start to enjoy some breathing space. It can help to treat yourself every now and then when you hit a debt milestone.
We hear a lot about a ‘rainy day fund’ but that can seem like a luxury many of us can’t afford. The important thing to do is start saving whatever you can. Could you gradually build up a small pot that will help if your circumstances change?
Having instant access to some savings also means you’re able to stick to your medium and longer-term savings goals. Make an achievable plan for short, medium and long-term savings. Think about what these are for, and make sure you pay into your pot every month, like you would any other commitment. Start small – give yourself a realistic target over the next few months and go from there!
We’ve lived through over a decade of historically low interest rates. Currently, there is no such thing as a decent interest rate on your savings. For your medium to long term savings (money you won’t need to touch for 5-10 year minimum) it’s worth looking into how stocks, shares and funds work. You may already have a working knowledge, but there’s always more information you could pick up, and knowledge to arm yourself with.
If you didn't know, you can invest your pension with Penfold to help it grow over time. We currently offer 6 different plans, tailored to your needs.
At Penfold, we've built a few tools to help you look ahead.
You can use our handy calculator to help you plan for retirement and work out what you might need to save. This can sometimes feel like a daunting task, but break it down and work out what you need to save each year, what you need over the next 10 years etc.
Could you plan on saving any pay rise or bonus’ each year? Start soon, even if it's small. The longer you save for, the longer you have for your compound interest to snowball your savings!