Financial Planning
A quick overview of financial planning
Financial planning is the process of creating a comprehensive holistic strategy to manage your money, achieve your life goals, and secure your future. It goes beyond simple budgeting; it’s about aligning your current resources with your long-term ambitions, whether that’s buying a home, protecting your family, or retirement planning.
Key elements of financial planning
Financial planning is a bespoke service which differs significantly from person to person, based on their wealth and goals. However, a typical holistic financial plan may include the following elements:
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Goal Setting - Identifying specific short, medium, and long-term objectives (e.g., clearing debt vs. buying a holiday home)
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Cash Flow Management - Analysing income and expenditure to ensure you are living within your means while saving for the future
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Risk Management - Using insurance policies, such as Life, Critical Illness and Income Protection, to create a safety net for you and your family
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Tax Optimisation - A complete review to ensure you use all available allowances (ISAs, Pensions, Capital Gains) to enable you to keep and save more of what you earn
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Investment Strategy - Building a diversified portfolio that matches your specific appetite for risk and future goals
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Emergency Funding - Maintaining a liquid ‘buffer’ of cash savings usually equivalent to 3-6 months of your general monthly expenses to cover emergencies and unexpected life events
Eligibility criteria and other requirements
While financial planning is typically synonymous with wealthy individuals, anyone can start a financial plan, regardless of their income level. To work effectively with a UK financial planner, you typically need to be a UK resident and have a clear understanding of your current assets, debts, and income. While guidance is often free, professional regulated advice usually requires an initial free consultation to establish your profile and risk tolerance, followed by paid advice.
This table highlights the core pillars that impact the success of a comprehensive financial plan.
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Factor |
Impact & Key Planning Checks |
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Cash Flow |
Planners track surplus income. This is the engine of your plan as without a surplus, you cannot invest or save |
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Tax Efficiency |
Moving assets into tax-free wrappers like ISAs can boost your long-term wealth by 20% to 40% compared to taxed savings accounts |
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Debt Ratio |
High-interest debts such as credit cards and loans are checked first, as clearing debt usually provides a better return than investing |
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Risk Appetite |
An attitude to risk questionnaire ensures you aren't exposed to more volatility than your personality can handle |
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Protection Gap |
Planners check for under-insurance. If you lose your income due to illness, your entire financial plan could collapse if not adequately insured |
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Review Frequency |
A plan is not a one-time event. Changes in legislation, tax rates, or your personal life require at least an annual review, to ensure you remain on track and that your goals haven’t changed |
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FAQs
No. A budget is a short-term tool used to track your weekly or monthly spending. A financial plan is a long-term strategy that uses your budget as a starting point. While a budget tells you where your money went, a financial plan tells your money where to go so that you can reach milestones like financial independence or mortgage-free living.
Connect with an independent financial adviser
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
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