What is a Financial Plan? A Complete Guide to Your Financial Future.

Many of us have a future vision for the lifestyle we aspire to, things we dream of owning, family, careers, when we would like to retire. Of course, much of what we look toward will require that all-important entity known as ‘money’. This is precisely why having a clear, comprehensive financial plan is essential when it comes to achieving your short and long term life goals.

But exactly what is a financial plan, and how can it help secure your dream future?

In this guide, we will explore financial planning basics, explain why financial planning is so important, and discuss the role of the financial roadmap in getting you started on your personal finance strategy.

Financial planning basics - what is a financial plan?

Whether you are planning for retirement, navigating a career change, starting a family or preparing for unexpected life events, a well-structured financial plan could be your key to achieving those life goals you aspire to.

So let us start with the basics: what is a financial plan?

A financial plan is a detailed strategy designed to help you manage your finances, achieve your financial goals, and navigate your way through the various stages of life with peace of mind and confidence.

The financial plan goes beyond a simple budget or savings plan. Consider it more a comprehensive roadmap that covers every aspect of your financial life, from investments and savings, to tax strategies, insurance, retirement planning and estate planning.

Why is financial planning important?

Financial planning is important because it provides you with a clear path to follow as you work towards your life goals.

Without a plan, it is easy to lose sight of your objectives, make impulsive decisions, or overlook potential risks.

A solid financial plan could help you:

• Build and protect wealth: By identifying opportunities and strategies for growth, whilst helping to safeguard against financial risks.
• Reduce financial stress: Knowing you have a plan in place provides peace of mind, allowing you to focus on living your life and enjoying it, rather than worrying about your finances.
• Make informed decisions: With a financial plan, you can approach major life decisions, such as buying a home or retiring, and navigate unexpected events, with confidence and clarity.

What is a financial roadmap, and when should I start planning it?

A financial roadmap is a strategic outline of your financial plan, detailing the steps you need to take at different stages of your life to achieve your goals.

The roadmap is a visual representation of your financial journey, helping you see where you are now, where you want to be, and how to get there.

When should you start planning your financial roadmap?

The answer is simple: the sooner you get started on your personal finance strategy, the better.

Financial planning is beneficial at any stage of life, but there are key moments when it becomes particularly crucial to start creating your financial roadmap:

• Getting married: When you get married, your respective finances will generally merge. However you may have your own assets, or family from a previous relationship, that you wish to personally protect. A financial plan can help navigate this transition smoothly.

• Starting a family: Children bring an array of new financial responsibilities, from childcare and education costs, to safeguarding their future.

• Changing career: A career change can impact your income, benefits, and financial goals, making it an ideal time to begin creating your financial roadmap, or revisiting one you already have in place.

• Retirement: Planning for a comfortable retirement can require years of preparation. The earlier you start, the better prepared you will be to achieve your goals once you have finished working.

• Unexpected events: Life is unpredictable, and a personal financial strategy can help you prepare for unforeseen circumstances, such as illness or job loss, or the loss of a loved one you are financially dependent on.

• Sudden wealth: Inheriting money or receiving a windfall can be a positive experience, but it can also be overwhelming. A financial plan can help you manage sudden wealth wisely and sustainably.

How to get started on your personal finance strategy?

Getting started on a personal finance strategy may seem daunting. But if you break it down into manageable steps, it can be easier to navigate.

Assess your current financial situation

Gather all relevant information about your income, expenses, savings, investments, debts, and assets. How are your savings and investments performing? Is your income allowing you to cover your expenses, put something aside, and follow the lifestyle you enjoy?

Understanding where you stand financially is the first step in creating an effective financial plan.

Set clear goals

Note that we did not say, ‘set clear financial goals’. This is because we believe that financial planning should not be all about accumulating money. Our feeling is that money should not be ultimate goal itself, but instead a tool to achieve what matters most to you in life.

So, make this step all about setting life goals. Consider:

• What lifestyle would you like to achieve now, and in the future?
• Would you like to start a family, or grow your current family?
• When would you like to retire, or semi-retire?
• Do you dream of starting your own business?
• Would you like to buy your first home, or move house?
• Are there dream assets you would like to own, such as a holiday home, a sports car or a boat?
• Would you like to help your children or grandchildren through their education, or onto the property ladder?
• Are there any other projects or dreams that you would like to achieve while you are fit and able?

Having clear life goals will guide your financial planning process.

Create an emergency fund

Before you start investing or making big financial commitments, it is important to ensure you have a safety net.

An emergency fund should cover at least three to six months’ worth of living expenses to cover you for unexpected life events, such as job loss or short-term illness.

Consult a financial planner

It is never wise to pursue a personal finance strategy without professional guidance.

A financial planner will work closely with you to understand your life goals, and then use their experience and expertise to develop a strategy that works towards achieving them, whilst managing risk in line with your personal tolerance levels.

Your strategy may be a mix of investments and savings, ISAs and pensions, but will always be tailored depending on your individual situation, your attitude to risk, and your goals.

A financial planner will also help you plan for taxes and inheritance. This is an essential element of your financial roadmap, helping you minimise your tax liabilities and maximise the wealth available to pass on to your loved ones by structuring everything effectively.

Your financial planner will also look to protect your wealth, and safeguard any financial dependants. This may include putting in place the likes of trusts, critical illness cover, income protection and whole of life insurance, again, depending on your unique circumstances and needs.

The importance of keeping your financial roadmap under review

Financial planning should never be considered a one-time task. Your financial roadmap and personal finance strategy should both be reviewed and updated regularly.

Financial markets fluctuate, inflation rises and falls, and your personal circumstances will change over time. Regular reviews with your financial planner will help ensure your plan remains aligned with your goals, and the current economic climate.

If appropriate, your financial planner may also suggest rebalancing your investment portfolio. This process, when professionally managed, can help maintain your desired risk tolerance levels, optimise your returns, capitalise on market opportunities, and prevent ‘emotional investing’ by following a set strategy.

Your financial roadmap – are you ready to start working towards YOUR life goals?

Your personal finance strategy is your route towards those all-important life goals you aspire to. It can also help you navigate life’s uncertainties, optimise your spending power, and protect your wealth for future generations.

Professional financial planning supports you in making informed decisions, adapting to changes, and keeping your financial roadmap on track.

It is beneficial to work with a financial planner who encourages you to identify the direction you would like your life to go in. One who supports you for the long term, sharing their experience and expertise, and helping you navigate market changes, identify new opportunities, and adjust your plan as your life evolves and navigates new directions.

At Finli, this is exactly how we work. We place your money within the broader context of your life and unique story, recognising that for many, building wealth isn't always the primary goal.

Why not let us help you take the first step towards your life goals? Contact us today to start building your very own personalised financial roadmap.