Unless you are reading this and you are in your very early 20s…lucky you, the time may well have arrived when you need to start thinking about long term financial planning. But it is something we all put off. When we are in our teens, we never have enough money, in our 20s we don’t have much but what we do have we spend at will. The 30s come along and we might want to buy a house so that’s often the sole focus…but we the 40s roll on a lot of people suddenly realise they don’t really have much in the way of a future plan. It’s a bit scary, its certainly not fun and it can also be a bit depressing, but we do really need to think about long term money stuff!
Here are a few things you can look into that will help create a more solid money plan without being something to dwell on too much.
Debt
Most of us have some, and most of us need to get it paid off if we can. Getting rid of debt is a great starting point for any long-term money plan. Its boring and painful but it really is worth the effort. However, take stock of the det you have before breaking your back to clear it. If you have some debt that has a mega low interest rate, then pay off the higher stuff first. Imagine spending 3 years paying off a debt with 1% interest when you can get 1.5% interest in a savings account? You could save the money and be 0.5% up! So, see what you have and work out what to clear first.
Savings
OK so this one is pretty simple and something everyone knows about, but a lot do not act on. Get saving, it is that simple. Even if you earn very little, just try and put something away each month into a savings account. The interest rates are rubbish on most accounts, but some do offer a little bit more if you agree to not have instant access. Not only does saving give you something for the future, it also provides an emergency backup if something bad happens. If you have children is can be nice to try and put a little bit away in a separate account for them each month. But this depends on having some spare money and lots of people don’t. Saving in general is a luxury but one it is worth trying to do as much as possible.
Property
While early debt was mentioned as a negative, mortgages are a little different. Property, in the UK, is generally a very good investment. Of course, prices can go down so never bet on them going up but the general trend is a positive one. When looking at long term plans property is a good area to focus on. It is important to take a mortgage very seriously though, don’t over stretch and push for a good deal! It’s not all about buying either. If you own something already it can be useful to look at what you can spend to increase the value. Beware though, you can over do this and do more work on a home than you will ever see back. Speak to a couple of estate agents about any planned changes and check they think you will see a return.
Life Insurance and Funeral Planning
Sorry! Yes it is rather dark to have to think about passing away but it is important. Life insurance is a requirement when you have a mortgage but look around for policies that will leave your loved ones well looked after. Consider critical illness cover too! A funeral plan is not a plan for what your funeral will be like, it is actually a financial product where you pay a bit each month and your funeral is all paid for when the time comes. Its not a big deal but can be a very nice way of not leaving extra costs to those around you. It is important to note there are some good and some bad funeral plans around so only use providers that are registered with the Funeral Planning Authority who regulate the industry.
Mindset
These are just some ideas. The key here is to change from a 20 something mindset to something more akin to what you may associate with older people. Get into a frame of mind that is geared around avoiding debt and saving money. Choose ways of putting things aside, plan ahead and try to find satisfaction in having something planned even if you can’t spend it for years. We may not retire until much later now and in the future but having savings, property and no debt will make it a lot nicer when it happens.
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