In recent months, the coronavirus pandemic has swept across the world, bringing uncertainty, anxiety, and stress. With social distancing measures in place and restrictions on what we can and cannot do, many people feel as though their lives and routine are out of control.
When it comes to your finances, job security and stability should be your number one priority; however, with many industries collapsing and thousands facing redundancy, it’s understandable why many are worried about their financial future. To help you create a strong foundation, here are 7 steps to take to prepare for an uncertain financial future.
Set Short Term Goals
When creating financial goals, you should begin with short-term goals that are focused on ensuring you can get through any emergencies and hardships that come your way. Your first step should be to build up an emergency fund that can be used to support you and your family in unsettling times. Whether you need your car repairing, you’ve received an unexpected medical bill, or you are paying for the basics should you lose your job, an emergency fund can put your mind at ease, knowing you have money available to cover any problems.
If you are in debt, you can visit New Horizons who can provide guidance and support. On their website, you can read 8 Tips for Getting Out of Debt, which can give you more clarity on what steps you can take to get back in control of your finances. If you don’t have enough money in your emergency fund to cover costs, you can apply for a short-term loan to pay off any hard-pressing debts. New Horizons is a regulated and fully authorised credit broker who works with a variety of lenders who may be able to help. Experts recommend that you should have a minimum of £1,000 in your emergency fund, so working out what you can realistically afford to take out is crucial.
Set Long Term Goals
Once you have established your short-term goals, the next step is to plan for your long-term financial goals. Whether you live with your partner, friends, or family, there are steps that you should take to create a healthy financial future for the years and decades ahead. You do not need to achieve anything straight away with a long-term goal, as they are specifically designed for benefits you will gain later down the road. Whether it’s paying off your mortgage, having funds available for your child’s education, or saving for your retirement years, you will need to have a sit down and think about the long-term future.
In uncertain times, you may not have the funds to put towards a long-term goal. Most importantly, you need to ensure that you can financially support yourself short-term before creating any goals for the long term future. There is no point saving up for your retirement years when you are struggling to pay your mortgage, or even put food on the table, so getting your finances in order for your current situation is key.
Examine Different Scenarios
Once you have laid out your short and long-term financial goals, it’s important to look at a couple of different future scenarios and learn how these scenarios may negatively impact your goals. While we all aim to have a healthy financial future, there will be obstacles along the way. However, it’s how you deal with the situation and steps you take which will keep you supported. Preparing for the worst will mean you are never taken off guard regarding your finances.
You may need to make adjustments to your goals and changes to your lifestyle should you fall on hard times in the future. If you find yourself in a bad future scenario where you’re unable to pay for the basics like your rent and food, this may mean that you need to begin making changes today to keep your financial future in check. For instance, you could look into online money making ideas, which can boost your income and provide more financial support for your future.
Create a Financial Review
If you aren’t sure what goals to make for your financial future, it’s best to begin by creating a personal financial review. Working alongside an advisor, a solid financial review will help you establish where you are at present, and where you would like to go in the future. You will need to look into your current saving and spending habits, and review any current debts, assets, and income, which will have an influence on how successful your financial plan is.
Put Your Family First
When creating your financial plan, it’s important that you put your family first. Whether you’ve had children or plan to in the future, there are several things you need to address, such as whether your aim is to pay for their university education, or if you would like to set up a trust fund. As there are many areas of your financial plan which involve your loved ones, it’s crucial that you ask these questions sooner rather than later, and have them in mind as your plan evolves. As a parent, it’s only natural that you will want your children to be taken care of financially in the event of your passing, so factoring them into your financial plan is essential.
Lifestyle and Career Decisions
Taking a look at your career trajectory is the next step that you need to take when planning your financial future. Having in-depth conversations about your wants and needs regarding your career and lifestyle should be included in your financial plan.
Understandably, most people want to climb the career ladder to receive a higher salary, which in turn provides financial security and stability. The lifestyle you currently lead can have a major effect on your monthly outgoings, so it may be time to make changes and cut back on your spending, which can free up some cash, provide relief and support, and give you the opportunity to save for the future.
Whether your aim is to retire at 55 or 75, regardless of age, it’s vital that you know what steps to take to get there. Your retirement planning should be an active exercise that is always in the back of your mind. When you reach the retirement stage, you will want to feel financially stable and secure, so drafting up your long-term plans is key for planning your financial future. For example, many retirees want to travel after finishing work, so you will need to make sure that you have the money available to fund your venture. If you enjoy working and need extra income, you may want to work part-time during your retirement. No matter what route you go down, it’s important that you factor your retirement plans into your financial plan.
The fear of the unknown can instil dread and anxiety, especially when it comes to your finances. While we’re currently facing challenging times, getting your finances in order and looking towards the future can help reduce stress levels and put your mind at ease. Creating short and long term goals will give you something to work towards, helping to build a healthy financial foundation for your future.