Life is full of many wonderful and exciting “stages” – from getting your first job, to moving out, advancing a career and possibly finding a lifelong partner (who you might share children with).
Later, your own dependents may leave home and you might approach retirement and grandparenthood. Along the way, you might travel and enjoy personal achievements such as sporting goals, hobbies, and education.
Although money should not be the goal of life, it is crucial to enabling your life goals. By planning ahead, you can lay a strong foundation to help prepare you for each milestone as you grow older. Below, our Carlisle financial planners here at Vesta Wealth explain how financial planning can benefit 4 specific milestones.
We hope these insights are useful to you. Please contact us for more information or to speak with a financial adviser:
t: 01228 210 137
e: [email protected]
#1 Promotion or new job
When your income rises, the immediate temptation most of us face is to increase our spending. Yet it helps to first review your finances to possibly revise your budget in light of your financial priorities and circumstances.
Consider how you could make your money work harder for you. For instance, are there any workplace benefits which you are not fully taking advantage of (e.g. a cycle to work scheme or salary sacrifice)?
Check your financial plan to ensure you have a robust emergency fund – such as 3-6 months’ worth of living costs – to help you endure unexpected “shocks” to your finances, such as a costly home repair. With any pay increase it might leave you with more disposable income. You might want to pay down some debts, or look to increase your pension or saving contributions.
#2 Marriage or civil partnership
The average cost of a wedding in the UK is £18,400 but it can be much higher (or lower) depending on the time of year, location and personal spending.
To prepare for this potential life event, it not only helps to dedicate some savings towards your big day (assuming a loved one is not paying for it!). You will also likely benefit if you establish a habit of open communication about money with your future spouse.
Around 62% of couples argue about money, and nearly 44% of UK adults avoid talking about finances with their partner altogether. However, if you can join forces in your attitudes and priorities regarding money, this will put you both in a much stronger position over the long term.
On practical financial planning matters, you should consider whether you want individual accounts, joint accounts or both for banking, pensions, investments and other key areas. Coordinating your finances can help you optimise your household’s tax position, helping you both to grow wealth more optimally.
The average cost of raising a child in the UK is estimated at between £150,000 and £200,000. This only accounts for essentials like food, clothing and childcare – not luxuries like holidays!
Starting a family is a wonderful human experience but it can also substantially change your finances. Perhaps one of you stops working for a few years to raise the children; or, one or both of you moves to part-time work. Another outcome is paying for childcare. In any case, the outcome is often a reduction in real household income for a time.
Knowing this, ahead of time, can help you prepare your financial plan so that your family can cope more easily. For instance, could you still afford your mortgage payments if one of you stopped working? Would this still be the case if interest rates go up?
You might also want to set aside savings, investments or even a pension for your child after their birth. Further down the line, would private school be an option for their education? What about university, marriage, or a deposit for a first home?
#4 Approaching retirement
Hopefully, you will enjoy a rewarding and successful career (e.g. a full-time job, part-time work, volunteering and/or parenting) which is very personally fulfilling. As you age, however, your goals and circumstances may change and you might start looking at some form of retirement.
Retirement is different for each person. One individual might want to fully retire from paid work on a specific date. Others may wish to “wind down” slowly by gradually reducing their hours and relying increasingly on pension income to support their lifestyle.
In any case, you will thank yourself if you planned far in advance to ensure your finances are secure in later life. The earlier you begin contributing to a pension, for instance, the more time it has to grow using the power of compound interest.
For instance, suppose an individual contributes £200 a month to his pension and achieves 6% annual returns (for simplicity). Over 20 years, his retirement fund could be worth nearly £91,000, with almost half of that amount consisting of interest. However, over 40 years the fund could be worth nearly £381,000, with around £285,000 emanating from interest earned.
Working with a financial planner can help you develop a robust long-term pension plan which accounts for your time horizon, personal goals and attitude to investment risk.
If you would like to discuss your financial plan and retirement strategy, then we would love to hear from you. Get in touch with your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England.
Reach us via:
t: 01228 210 137
e: [email protected]
This content is for information purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult your Financial Planner here at Vesta Wealth in Cumbria, Teesside and across the North of England.