In difficult economic times planning ahead is more important than ever. Good financial planning can mean you’re prepared when times get tough, and that you can rest easy in the knowledge of a more secure future. Read on for five key ideas to get you started: 1. Avoid unmanageable debt Don’t borrow if you think you may not be able to pay back, unpaid debts can spiral out of control leaving you worse off than when you started. You should consider the long term consequences of borrowing before entering into any agreement. Even though not all debt is what could be considered ‘bad’ debt, and there will be times when you are likely to need to borrow, for example if you are buying a home, it is always a good idea to have a back-up plan if things go wrong or you lose your income. 2. Spend within your means Keep track of your income and balance it with your outgoing expenses to avoid getting into debt in the first place. Make a monthly budget is order to ascertain exactly where your money goes, prioritize necessary outgoings, and if the budget is tight cut back on what is less important. Some borrowing may be necessary, but from day to day your income should at least mirror if not exceed your outgoings. 3. Secure your retirement With increasing life expectancy planning for retirement is becoming more and more important. Assess whether your contributions to a pension scheme or your savings and other assets will be adequate to support you in later years, and adjust accordingly if possible. It is also important to consider how you would cope with eventualities such as requiring long term care.
4. Save for a rainy day Putting money away can offer protection in an emergency, giving you a fund to draw on should you unexpectedly fall on hard times. There are a number of different saving options available offering finding the right option can depend on your needs and circumstances. Many experts recommend you have up to the equivalent of three months salary to fall back on in case you should experience an interruption to your income.
5. Provide for your loved ones once you’re gone Making a will and winding down your assets in later years can help your prospective beneficiaries get the most out of your assets once you’re gone. Beware of the popular misconception that will-making is only for those already in their twilight years though, make sure that your assets are divided up according to your wishes in the event of the unexpected. You may also want to consider taking out life insurance to secure the finances of your spouse or children should disaster happen. This post was written by John Hughes who is the resident blogger at Independent Financial Advisor, a UK based site that provides access to independent financial advisors as well as to debt advice charities for those struggling with their debts.