Financial planning is the task that most of us put off when we think about our daily 'to do' list. If you make that mistake, you'll probably end up losing money.
96% of the British population regularly make ‘to do’ lists with tasks to tick off. But only 5% put financial planning tasks, such as reviewing a pension, at the top of their lists according to the Payments Council. That’s a mistake.
Granted, other chores can seem more pressing than money matters – 60% of us always put household tasks on our ‘to do’ list – but financial planning will make much more of a difference over the long-term than cleaning the house. Putting off some household chores for a few days isn’t that big a deal in the wider scheme of things.
So what are the financial planning tasks that we should be doing?
Budget
Well, the best place to start is by drawing up a personal budget. And if you already have a budget, look to see if you can improve it.
First, keep a record of all your spending over a month. Make sure that you include every single spending item right down to an apple or a coffee at Costa.
Then look at how much money you’ve got coming in. Obviously, for most of us, take-home pay will be the most important figure here. But don’t forget about any other sources of income you may have e.g: interest from savings accounts, benefits or dividends from stock market investments.
Having done that, you’ll see if you’re spending more than you earn which is nearly always a massive mistake. You may also spot some areas where you can cut back spending and redeploy the money for long-term saving.
You can read more about drawing up a budget in Set a budget and stick to it.
MoneyTrack
Once you’ve drawn up your budget, it’s essential that you stick to it. Lovemoney’s MoneyTrack tool can make a massive difference here.
You can set budget goals with the tool and then check to see whether you’re achieving those tools every day.
If you’re wondering how the tool works, it aggregates all your spending from all your different cards and bank accounts. You can see all your spending on one page.
Even better, MoneyTrack also automatically puts your spending into different categories such as ‘Clothes/accessories’ or ‘Eating out, pubs & takeaways’. So if you’re spending too much at your local branch of Pizza Express, you’ll quickly notice and you can put your next visit on hold.
What else?
Once you’ve drawn up your budget, there’s a whole host of other issues that you need to look at:
- Consider what your non-financial goals are for the rest of your life.
- Debt management: if you have debt, make sure that you’re paying the lowest possible interest rate and also work out a schedule for paying off that debt.
- Retirement plan: where is your income going to come from when you retire? Do you have a pension? Could you improve your pension arrangements?
- Inheritance plan: who will inherit your money when you die? Can you minimise the tax bill your descendants will have to pay?
- Protection: will your dependents be able to cope if you die or become ill? Should you buy insurance to cover for these possible events?
Now dealing with these issues may seem scary, but if you read the articles I’ve linked to in the above list, you may not feel quite so overwhelmed. You could also visit an independent financial adviser who should be able to help guide you through this process.
Indeed some advisers now call themselves ‘financial planners’; anyone using that title should be particularly keen to aid your planning process.
Back to the list
It also helps if you can break the planning process into bite-sized chunks that you can gradually do over a period of weeks or months. And that’s where your ‘to-do’ list comes in. You can put one of those bite-sized tasks at the top of your daily list on a regular basis.
And once your financial plan is drawn up, you should still take the time to regularly check that everything is going to plan. When you do that, you should find that your finances are improving: you’ll probably spend less money on dumb things that you don’t really need, you may end up paying less tax, and you may have less debt too.
In other words, putting some planning tasks at the top of your daily ‘to do’ list makes a lot of sense.
- Check out MoneyTrack
What do you put on your ‘to do’ list? Tell is in the comments box below.
More from Lovemoney:
Do these 20 things and you’ll always be poor
Too many people are no good at budgeting