What Should a Good Financial Plan Actually Include?
What should a good financial plan include
In today's fast-evolving economic landscape, establishing a robust financial plan is not just beneficial—it's vital for your future. Whether you aspire to retire comfortably, support your family, or navigate daily financial challenges with ease, a well-structured financial roadmap is your key to achieving lasting security and peace of mind. But what exactly should a good financial plan include? Let's break it down.
Goal Setting: The Foundation of Financial Planning
At the heart of any financial plan lies your financial goals. Start by defining short-term goals, such as saving for a vacation or paying off debt, and long-term goals, like retirement or buying a house. By having clearly outlined objectives, you're giving yourself a target to aim for, which makes it easier to devise strategies to meet those goals.
If you have debt, it's essential to include a strategy to manage and reduce it. Whether you opt for the snowball method, paying off smaller debts first, or the avalanche method, focusing on higher-interest debts, your plan should outline specific actions and timelines for eliminating debt. Budgeting is a critical component that helps you understand your income and expenses. A good financial plan should include a detailed budget that accounts for all sources of income and all expenses fixed and variable.
Tip: Consider writing your goals down or setting reminders to revisit them regularly. This keeps them at the forefront of your financial planning.
Long-term planning: Investing in the future
Investing is key to growing your wealth over time. A good financial plan should outline your investment strategy, aligning it with your risk tolerance and financial goals. Consider asset allocation, diversification, and regular contributions to retirement accounts or other investment vehicles to enhance your wealth-building efforts.
Did You Know? It's never too early to start planning, the earlier you start saving, the more you can benefit from compound interest. Even small, consistent contributions can grow significantly over time.
Risk Management: Planning for the Unexpected
A good financial plan must account for uncertainty because life happens. Illness, job loss, or a market downturn can quickly disrupt even the best-laid plans. That's where risk management comes in. Specialist insurance, estate planning, and debt strategies help protect your family and finances from major shocks.
What to include:
- Life insurance, critical illness cover, and income protection
- A will and power of attorney*
Regular Review and Adjustment
Finally, a financial plan is not a one-time activity; it requires regular reviews and adjustments. Life circumstances change, and so do financial situations. Schedule annual reviews of your plan to ensure you're still on track toward your goals and make any necessary adjustments.
Reminder: Your financial goals may evolve over time, stay flexible and adapt your plan as needed.
A good financial plan is not a one-size-fits-all document. It's a personalised, evolving framework that helps you manage today while preparing for tomorrow. It should reflect your values, life-goals and when done well, it brings clarity and control to your financial world.
Whether you choose to work with a financial adviser or manage your finances independently, ensure your plan covers these core areas. The result? Greater peace of mind and a more secure financial future.
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
*Will writing and Powers of Attorney involve the referral to a service that is separate and distinct to those offered by St. James's Place and along with Trusts are not regulated by the Financial Conduct Authority.
Although the content of the article was correct at the time of writing, the accuracy of the information should not be relied upon, as it may have been subject to subsequent tax, legislative or event changes.
