If anything is going to imbue you with a newfound sense of active purpose in those first furtive days of a new year, it isn’t the word ‘finances’. Cold days, dark nights, and a head full of New Year’s resolutions ought to provide you with something more fundamental – but here, we’re going to argue that finances are fundamental. There’s a personal growth and development angle to developing shrewdness when it comes to your personal finances, but there’s also a wider social impetus, too.
Fundamentally, life is different from how it used to be. We live longer lives – and those lives are getting increasingly expensive too. It’s no longer good enough to bung money into a savings account and assume you’ll be fine. Developing an agile financial strategy, which can support the various stages of your life, is vital to ensuring you can make the most of that newfound sense of active purpose when it does come around.
Early-Stage Planning That Builds Confidence
Any good financial plan has to start somewhere – so let’s start with the present. What is your current financial situation, and what can you currently afford to put away? This is the time in which you start familiarising yourself with the basic principles behind savings and interest, investments and returns.
A key principle to understand is that of compound interest. Compound interest describes the manner in which money grows over time, acknowledging a snowball effect as your interest starts to earn interest of its own. The lesson to learn from compound interest is simple, too: the sooner you start, the more you stand to gain. This is the point at which you open high-interest savings accounts and start to dabble with stocks and shares ISAs.
Mid-Life Strategy: Balancing Growth and Responsibility
As you get older, as your career progresses and as your savings grow, so too do your responsibilities change – and with them, your priorities. You may be in a better position to save for the future than ever, but that future is also fast coming up to meet you in the form of a new family, a new home, and the future of each.
It is at this point that your ambitions may truly exceed your reach. Here, professional advice regarding wealth investment for families can be an absolute godsend, even if only to find the most efficient way to put money safely away for your children.
Later Life Planning and Retirement Readiness
The reason you’re thinking about your life stages right now and planning accordingly is to ensure your later life is as comfortable as possible. Just as your savings can grow through compound interest, so too can they be devalued by the very inflation that’s making life expensive now.
Your savings need to outcompete the potential for inflation, ensuring a standard of living with which you are comfortable towards the twilight years. Reviewing your pension plan in the short term is a good start, but moving your finances around to benefit your risk tolerance can also be an essential step to maximising your potential retirement pot.