Most people will have multiple financial goals they want to achieve. A common challenge is balancing these competing goals and understanding how to use your assets to work towards them. It’s an area that a financial plan could help you with.
Over the last few months, you’ve read about short-, medium-, and long-term goals that might be important to you and different financial strategies that suit each time frame. Now, read on to find out how a financial plan could help you strike a balance that works for you.
Deciding which goal to focus on can be difficult
Without a tailored financial plan, it might be difficult to understand how you should use your assets to move closer to your goals. For example, if you have £500 left over each month after your regular expenses, would you be better off saving it in case of an emergency or contributing more to your pension?
On top of this, you want to balance working towards goals with enjoying your life now.
Unfortunately, there isn’t a one-size-fits-all solution that’s simple to follow.
Instead, your needs, income, and other financial commitments, along with your goals, will affect what strategies could suit you. A tailored financial plan could help you assess not only how to reach a goal, but how prioritising a certain goal might affect others.
4 ways a financial plan could help balance multiple goals
1. A financial plan identifies your goals
Your goals are central to your financial plan. So, working with a financial planner provides you with an opportunity to clearly set out what’s important to you and identify goals.
As part of creating a financial plan, you might set out clear time frames for when you’d like to reach each goal. In addition, it’s a chance to discuss why these goals are important to you and if they’re realistic, which might change some of your objectives.
For instance, you might have set a goal to have £500,000 in your pension before you’ve calculated how much income you need in retirement or how you’ll use other assets. As a result, after speaking with your financial planner, you might find the amount you need to save into a pension is lower, which could help you support other goals.
Similarly, you could find you’ve underestimated how much you need for a certain goal. Being aware of a potential gap sooner might mean you have more opportunities to close it.
2. A financial plan could model different scenarios
A key challenge to balancing goals is understanding how a decision to allocate to one might affect others. Would reducing pension contributions to build a nest egg for your child affect your security in retirement?
Your financial planner may create a cashflow model that could help you assess the long-term impact of your decisions. To create a cashflow model, you input information like your income and the value of your assets, and set certain assumptions, such as the rate of inflation and investment returns. You can then adjust these assumptions.
It’s important to note that while a cashflow model could provide useful insights, the outcomes are not guaranteed.
3. The data from a cashflow model could help you understand trade-offs
At times, you’ll need to decide which goal is more important to you. A cashflow model could give you access to the information you need to understand trade-offs.
You might look at how changing your pension contributions will affect your disposable income now and the income you might receive in retirement. Would you prefer to reduce your expenses now if it meant you’d have more to spend when you retire?
A cashflow model could be used to explore different scenarios to understand how the decisions you make now could affect various goals, so you can make decisions that align with your priorities.
4. A financial planner could adjust your plan as your goals change
A financial plan you put in place now may not still be suitable for you in 10 years. Over time, your goals and priorities might shift. Regularly meeting with your financial planner to review your plan could help ensure it continues to reflect your goals.
Contact us to talk about your goals
If you’d like our support in creating a financial plan that covers your short-, medium, and long-term goals, please get in touch.
Please note:
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate cashflow modelling.