Pension Plans to last a Lifetime
With a good financial plan from the outset, it will help people to meet the competing financial needs they encounter in their lifetime.
The financial crisis saw many people reducing their debt and managing their savings. Investments took a backseat. With the recovery now well underway people are starting to look at their future financial plans.
Without realising it most of us already know how to execute a financial plan, whether it is saving for our first car or holiday, or planning for our wedding or even saving a deposit for our first house.
Our experience tells us that Budgeting is the cornerstone of any financial plan.
Once you have set out your short, medium and long term goals then you can set out the steps needed to achieve them.
Having a plan with small steps is really important in helping to deal with personal financial issues, a good lifetime financial plan should be simple, think of it in these four simple steps:
Identify your short, medium and long term goals
Quantify what each step will cost
Prioritise each step into must-haves and nice-to-haves.
Set out the action plan to achieve each goal.
It is a good idea to get some professional advice when making long term financial plans which will help you to make informed decisions around risk and return to maximise your long term goals.
For shorter term goals like buying a car or paying for a holiday or even saving for a wedding this is where Cash savings are best suited. Young people are usually more interested in spending than saving, but as you go through life and make larger purchases, you will need life insurance, health insurance, car insurance then as you have children you have got to pay for their education, as there are so many competing needs for your financial resources, that is why it is so important to start out with a plan for how you are going to best allocate these funds.
How do you prioritise what you spend your money on in those circumstances? Not everything you earn should be spent in the same month. That is easier said than done, especially when you have crèche fees, mortgage repayments, health insurance, car insurance etc. Most people don’t start a pension until they are in their 30’s or 40’s and because of this they are playing catch up.
That is why it is important to set targets and write them down so you can visualise them. Studies have shown that by writing down your goals people are more inclined to stick to them!
A huge percentage of the working population do not have pension plans in place and will end up coming short in retirement age or be dependent on the state pension. This needs to be addressed by the government, but in the meantime it is never too late to start a plan of your own.
There are four components to a pension plan:
The day you start
The day you retire
The amount you contribute
How much you invest in it
So just to summaries then;
Set Realistic Goals for short, medium and long term financial plans
Use cash for cars, holidays and weddings
Write down those goals to give yourself a better chance of sticking to them
Start a plan now no matter how small your monthly contribution is going to be