Financial Planning

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Financial planning explained

  • Financial planning means the mapping out of the financial direction an individual, family or company wants to make – informed by long-term goals and objectives.
  • It is a way of formalising the best financial strategy, for example, individuals and families looking for long-term security, the ability to enjoy life, saving for retirement and passing on money to children.
  • Financial planning is not the preserve of financial advisers – although they can play a big role, financial planning can also be done by yourself or using a variety of other tools.

Areas of personal financial planning


  • Arguably, the most important aspect of formulating a financial plan is maximising the amount of money saved for retirement. This will make a great difference to your quality of life in your later years.
  • Like all financial planning, retirement planning involves balancing the lifestyle you desire in retirement with the financial means at your disposal.
  • Having a solid plan for your pension is the best way to ensure you reach the retirement you want.
  • Optimising other income sources such as property and investments is also important.


  • While tax is an unavoidable fact of life, a plan which takes advantage of the tools at your disposal can contribute to useful savings in the long term.
  • Making use of your tax-free ISA allowance and the pension annual allowance is a no-brainer.
  • Ensure you are claiming all the tax credits you are entitled to, for example, if you care for children.
  • Make sure you are in the right tax code to avoid overpaying. If you discover you have been overpaying, you can claim this amount back.
  • Always file your tax return on time to avoid a penalty.


Ensuring you have proper coverage to protect yourself for a variety of eventualities is important. These include:

  • Life insurance – offers protection for your loved ones should the worst happen. Ideal for individuals with dependents or large financial commitments, such as a mortgage.
  • Property insurance – your property is very likely to be the biggest individual asset in your investment portfolio, as well as home, so its value should be protected. If you are a landlord, watertight insurance is even more important.
  • Car insurance – as well as it being illegal to drive without third-party insurance, it is also wise to invest in comprehensive insurance to avoid the hit of expensive repairs or a new car in the event of an accident or breakdown.
  • Critical Illness Insurance – a long-term insurance policy which covers a range of serious illnesses listed within a policy, often referred to as the ‘dread diseases’. Whilst the exact list of illnesses can differ, most claims will cover certain types of cancer, heart attacks or strokes.
  • Private Medical Insurance – whilst those living in the UK have the benefit of the National Health Service (NHS), private medical insurance can help you avoid waiting lists, giving you more control and access to the best medical care when you want. For the affordability, dental care is often picked.
  • Disability insurance – a sudden and unexpected deterioration in health can destroy someone’s capacity to work and earn money, because of this, it is important to be covered for this. Also known as Income Protection Insurance.

After you die

Preparing how you will pass on your estate after death is vital to help your loved ones.

  • Writing your will is important, and should be done while you are still fit and healthy.
  • A will can help you to reduce your overall Inheritance Tax that could be payable, and therefore, the amount of money you leave behind.
  • Using a will-writing service to help you allocate your assets after death is advisable.
  • A will is vitally important if you have children or other family members who are dependent on you financially, you want to leave something to an individual outside your immediate family and lastly if you’re divorced or separated.

How to create the best financial plan for you

Set out your life goals

  • Whilst this may sound daunting, it is essential to plan what you want to spend your money on in the future and how much you’ll need to reach your targets.
  • You should make separate plans for the short and long term – how do you want to live now and in the next few years, and what are the goals you want to achieve in your retirement?
  • Consider the kind of lifestyle you want to have in the coming years.
  • Think about your priorities. Are you looking to help your children through university, dreaming of purchasing a new house, planning to move to a different country or setting a date on when you would like to retire?

Calculate your current assets


  • It’s impossible to plan for your financial future without knowing where you stand currently.
  • Your assets include all of your cash savings, any property, pensions (personal and workplace) and any other investment that you hold. Obtain accurate up to date values for each and use this to calculate how much you own.

Project your future assets

  • It is difficult to forecast what the future will hold for us financially, but making a conservative estimate now can help dictate your strategy and future.
  • Consider your current earnings – are they sustainable? Is your job secure or will you likely change jobs? Are you likely to receive a pay rise? How much more are you likely to earn in 10, 20, 30 or 40 years with progression in your current field? How much could you earn if you retrained in a different field?
  • What are your current outgoing – the only way to determine this is by carefully examining your accounts. How much do you expect your outgoings to change? For example, they will likely go up when you have children and reduce when your children are adults and start working.
  • What would your potential future earnings allow you to invest in? Do you expect to receive a windfall such as an inheritance or the sale of a property, and how could you invest this?
  • Consider how close you are to achieving your goals and how close you would be given realistic estimates of your future assets.
  • Balance your goals and the means you have to achieve them, consider the best or most efficient way to get to where you want to be.
  • Make changes in various areas of your financial life to maximise the money you can save. The areas discussed above (retirement, tax, insurance and estate) are the key areas to consider.
  • Seeking some sort of help or advice, be it from a financial adviser or another source, is advisable to ensure your calculations are accurate and your goals are achievable or reasonable given circumstances.
  • Set yourself challenges and milestones to reach – these will help you stay on track in implementing your financial plan.

Monitor your progress

  • The best of plans mean nothing if that are not followed through on.
  • Evaluate your progress periodically in relation to the financial goals you set yourself. Are you on target to achieve your life goals or will changes be needed?
  • Your financial planner will be able to give you a better impression of your progress so far, and suggestion or changes in strategy to get you back on track.

What is a financial planner?

  • Financial planners are, in theory, the best most knowledgeable and most experienced sources of financial advice.
  • Financial planners can be extremely useful in helping you formulate your perfect financial plan, and putting it into action. However, there are plenty of other, less expensive options.

The major bodies that offer professional training and qualifications are;

  • The Chartered Institute For Securities & Investment (CISI), which offers the “Private Client Investment Advice & Management”, “Chartered Wealth Manager” and “Chartered Financial Planner – (CFP)”.
  • The Chartered Financial Analyst (CFA) Institute, which offers the CFA Program and upon completion, the CFA Charter.
  • The Chartered Insurance Institute (CII), which offers “Advanced Diploma in Financial Planning” and “Chartered Financial Planner – (CFP)”.

Other options for helping you make a financial plan

  • Robo-advisors – a lower-cost alternative to a traditional financial advisor. Typically requires you to answer a range of questions about your financial situation and risk tolerance which is then used to dictate your financial strategy. The lower fees and lower minimum deposits are made possible as the transactions don’t rely on human time.
  • Online advisors – these often rely largely on Robo-advisors but combine them with human advice.