When it comes to financial planning, there are no one-size-fits-all solutions.

Any effective savings plan must be tailored to your personal needs and ability to save, taking into account factors such as your income level and the number of dependents you are responsible for.

This means it is essential to develop a plan that meets your needs and considers your unique circumstances.

To simplify this process, we have outlined six basic steps that will help anyone create a financial plan.

Please Note: This blog provides generic information and the writer's opinions and should not be relied upon for investment decisions. Sheffield Mutual has provided no advice. If you doubt whether a savings or investment plan suits you, consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand.

Getting Started With Financial Planning

1. Set A Goal

When it comes to financial planning, setting a tangible goal is a critical part of the process.

Saving money every month can feel like a thankless task, especially during periods when the cost of living is increasing. Although watching your account balance grow can be satisfying, failing to establish a clear goal means that you never know when you’ll get to enjoy the effort that you’ve put in, which can quickly become demoralising.

Having a clearly defined savings goal is the best way to know when you have met your target, and it lets you know when you get to spend your money or when you should start investing it in a new plan.

Whether you are saving to save a lump sum for retirement, saving for the perfect holiday, or trying to give a gift to a family member, start by working out how much money you need, how much money you can save each month, and build a plan that incrementally builds toward that goal.

2. Explore Your Options

Across different financial institutions, there are a variety of savings accounts and savings plans that can be utilised to develop a complete strategy. Each of these accounts comes with its drawbacks and benefits. 

When you are developing your financial strategy, it’s important to remember that you can open multiple types of accounts for the same strategy. 

For example, if you were looking to save in a tax-efficient way, you could open a Regular Premium Investment ISA. This ISA is designed for regular monthly contributions, ranging from £30 to £1,666 a month. If you then manage to reach your annual ISA allowance by doing this, you could go on to open a Tax Exempt Savings Plan to make additional tax-free gains on top of your ISA allowance, up to an annual contribution of £270. Finally, if you reach this limit, you may want to consider a Regular Savings Plan for any additional savings you wish to make.

However, it’s essential to research different financial products to ensure you are making the smartest investment choices for your own goals.

Please Note: Capital is at risk. Tax treatment depends on individual circumstances and may be subject to change in the future.

3. Check Expert Opinions

Luckily, there are plenty of experts who specialise in financial planning. Whether you are looking in a newspaper, magazine, or online, you can find a range of opinions, ideas and strategies about how to create an effective financial plan, as well as pointing out some common dos and don’ts that can help you avoid any financial pitfalls.

However, much like exploring different types of accounts, it’s essential to do your research. Not all experts agree, and some advisers may advocate high-risk strategies, such as investing in volatile assets, without properly considering the long-term risks.

When seeking expert opinions, begin by researching established financial platforms, such as banks, reputable financial journals, or credentialed experts with a proven track record. Many established financial experts have a legal responsibility to provide accurate, unbiased information, as well as wanting to avoid reputational damage.

Even when you think you have found valuable advice, think carefully about what your goals are and interrogate any advice you receive to see if this will help you achieve them.

4. Think About Debt

Although saving money is incredibly important, part of financial planning is having a plan to pay off any outstanding debts.

Often, when people are trying to save money, they are excited about seeing the value increase in their bank account.

However, if you have any outstanding debts like credit cards or short-term loans, you’ll often find that you are paying a higher rate of interest on the debt than you are making in your savings.

If this is the case, you will save money more effectively by paying off your outstanding debts than you will by saving money in an account or plan.

If you have a more favourable type of debt, such as a 0% interest debt for a fixed period, it’s essential to have a plan to pay off this debt before the fixed term ends and interest is charged. A good idea for this could be to save money in an instant-access savings account, allowing you to access your savings and pay off any loans on your schedule. 

5. Consider Flexibility

Financial planning is a crucial tool for maintaining a healthy bank balance, but sometimes the unexpected can occur.

If your boiler stops working, your car breaks down, or you receive an unexpected bill, accessing money immediately could become a priority.

The first part of any financial plan should be to develop an emergency fund for this exact reason. By having enough money in an instant-access savings account to cover between 3 and 12 months’ worth of bills, you should be able to cover any immediate shortfalls.

In addition to emergencies, other life events might demand some flexibility as well. If you are considering moving home, switching jobs or if you have a child who is considering going to university, you might benefit from increased flexibility in how you can access your cash.

In this case, products like Lifetime ISAs or Regular Savings Accounts may not be in your best interest, as both provide penalties for removing funds early.

However, it is also possible to maintain a diverse portfolio of bank accounts with different levels of access. Keeping some money in an instant-access account while also saving into a LISA, for example, could be slightly less efficient in terms of absolute gains, but will provide you with additional options when it comes to accessing your money.

6. Be Consistent

After you have set a goal, done your research, checked expert opinions, calculated your debts and considered any short or mid-term changes to your circumstances, it’s finally time to start implementing your financial strategy and begin saving money.

Saving consistently is often the biggest hurdle to meeting savings goals. Savers are usually tempted to wait until the end of the month and see how much money they have left over. Unfortunately, especially during difficult times, there is no money left, or at least not enough to meet your savings goals.

Moving money directly from your salary into your savings plan on the day you get paid is often a more effective approach. People are often less inclined to withdraw cash after it has been added to their savings. Transferring the money immediately will give you a more realistic idea of your budget for the month, rather than tempting you to indulge in extras like takeaways or online shopping. 

Start Your Savings Journey Today With Sheffield Mutual

If you are looking for a new way to start saving or want to explore your options, browse our range of Regular Savings Plans today to see if we can help you meet your savings goals.

At Sheffield Mutual, we pride ourselves on empowering our members to make the financial decisions that are right for them, including learning how to create a financial plan. Whether you are saving for a dream holiday or you want to have some extra money in retirement, we offer a range of products designed to help you save, grow, and invest your money.

If you have any questions about our financial products or ​​are interested in becoming a member of Sheffield Mutual, please contact our friendly team, who will be happy to provide you with any information you need to make an informed decision.

This blog provides generic information and the writer's opinions and should not be relied upon for investment decisions. Sheffield Mutual has provided no advice. If you doubt whether a savings or investment plan suits you, consider contacting a financial adviser for advice. If you do not have a financial adviser, you can get details of local financial advisers by visiting www.unbiased.co.uk or www.vouchedfor.co.uk. Advisers may charge for providing such advice and should confirm any costs beforehand.