Despite our best intentions, planning for our financial futures can be a problematic process. In fact, according to a recent AICPA survey, approximately 43% of respondents who set financial goals in the past 5 years fell short or failed to maintain success. Fortunately, there are several steps which you can take which will help you to secure your financial future. So without further ado, listed below are our top tips forsetting realistic long term financial goals, adopting responsible saving practices and safeguarding your retirement prospects!
Evaluate your current financial situation
Firstly, it is worthwhile taking a moment to evaluate your current financial situation. This simple yet highly effective process will equip you with a wealth of information that you can use to safeguard your financial future. Create a list of all your assets, including cash, property, savings accounts and any other investments, as well as a list of all your daily, monthly and annual expenses. By scrutinising this financial data you will be able to calculate your net worth by subtracting your total expenses from your total assets. You will also be able to review all of your expenses and identify areas where you can save money; such as cancelling unnecessary product subscriptions or implementing energy efficient changes to your lifestyle which will reduce your household electrical bills.
Calculate your retirement needs
Once you have evaluated your current financial situation you can begin to plan for your retirement. As a rule, financial experts estimate that you will need to set aside at least 70% of your pre-retirement income in order to maintain your lifestyle to the standard to which you have become accustomed upon retiring. Combine this estimate with other factors, such as the age you plan to retire, the current rate of return on your investments, as well as tax relief and inflation rates, and you will be able to calculate your retirement needs and save accordingly. Although this can seem like a daunting process at first, fortunately there are several sites, including Auto Enrolment and Age UK, that provide free pension income calculator resources which you can use to work out the exact value of the monthly pension contributions that you should begin to save.
Research all the pension plans on offer
Now that you have worked out how much you will need to contribute towards your pension each month it’s time to start saving! As matters stand, there are a wealth of pension plans on offer; including workplace pensions, private pensions, and pension plans which have been specifically designed to suit self-employed individuals. As such it is strongly advised that you take advantage of impartial financial advisory sites, such as the Pensions Advisory Service or the Money Advice Service, in order to make a well-informed decision on the pension plan which will best compliment your long term retirement plans.
Plan for unexpected expenses
Ultimately, no matter how meticulously you plan for the future there will inevitably there be unforeseen circumstances, such as weather-related damage to your home, your car breaking down, or unexpected medical bills, which can drain your hard-earned savings. Subsequently, it is highly advised that you prepare for these unfortunate eventualities before they occur by opening an emergency savings account. Making modest monthly contributions into this account will provide you with a financial buffer that will resolve any emergency situation without diminishing your pension pot!