This week is Financial Planning Week, an initiative set up by the Chartered Institute for Securities & Investment (CISI) to raise awareness of the importance of financial planning and to help people nationwide organise their finances to achieve their future financial goals. We thought it fitting to share 5 steps on how you can improve your own finances:-

1. Calculate your personal net worth

This isn’t as difficult as it may sound. Firstly, you need to make a record of all your assets which is anything you own that is of worth. This includes the value of any property and vehicles you own, cash and savings, investments and pensions. Remember that property prices do change over time so it is a good idea to do some online research to see what similar houses have recently sold for to give you a better idea on this.

Next, you need to detail all of your liabilities such as mortgages, loans and any finance.

Your net worth is simply the difference between your assets and liabilities. This figure represents where you are financially at that particular moment, and it is likely that this figure will fluctuate over time. Although it is an interesting exercise, the real value comes from making this calculation a regular occurrence. Calculating your net worth annually will enable you to evaluate your progress, highlight your successes, and identify areas that may require some attention.

2. Assess expenditure and set budgets

Have you scrutinised your bank statements and evaluated everything you spend your money on?

Completing an expenditure spreadsheet is a useful exercise to highlight exactly where your money is going and highlight any areas where you may be overspending. There is one you can download at the bottom of this page. This spreadsheet also has a 'future' column, allowing you to calculate your income and expenses now but also project future figures if you expect there to be some changes to your personal or financial circumstances in time to come.

This may make you think if there are any non-essentials that you can afford to cut back on. If so, try setting some realistic budgets and stick to them.

3. Manage debt

Refer back to your list of liabilities. For any loans, finance or credit add details of interest rates and the date that any interest-free periods end (if applicable) as well as the minimum payment amount and the date it is due. Now make a plan as to how you will choose to clear your debt going forward, starting with those that have the highest interest rates (usually credit cards). This is dependent on Step #2 as the more money you manage to free up from cutting unnecessary spending, the quicker you can pay off your debts.

4. Be prepared

We always recommend that you have an emergency fund to fall back on in case of a financial emergency. We suggest having between 3 and 6 months’ worth of living expenses set aside in an easily accessible savings account to cover essential outgoings should you fall into financial difficulty.

5. Save for your future

The next step is what to do with the current investable assets you have and any surplus monthly income you can free up or create. There is always a lot to consider here including tax implications, your personal attitude towards investment risk, diversification and how long you want to invest for. It may be that you already have some investments and pensions, are they suitable for your requirements and your long-term goals?

As there is so much to think of when it comes to preparing for your future and making your money work best for you, it is always recommended that you seek professional independent advice from a regulated firm. Tools like Cashflow Modelling can help stress test your finances and look at future outcomes and whether you will have sufficient money to achieve your goals.

As ever, if you would like a no-obligation meeting with one of our experienced Financial Planners to discuss making the most of your finances, get in touch with us today.