Financial planning is the whole process of managing your finances over the course of your lifetime, and it includes all aspects of spending and borrowing, saving and investing, and budgeting.
Saving is important, especially in the current financial climate and now that jobs are less secure and people have more financial commitments than ever before.
It is recommended that everyone saves 10% of their income and places it in a high interest savings account that requires a notice period to be accessed.
Some big spends you might want to save for
Buying a house: Whilst not everyone wishes to buy a house, it should be something that most people consider – if you have a secure job and plan on settling down in one area, either alone or with a partner, it will probably be something you think about. Buying a house is probably the biggest investment you will ever make, so it pays to plan for it carefully. Buying a house will involve you saving up a deposit, and usually borrowing the remaining amount in the form of a mortgage.
Getting married: The average cost of a wedding nowadays is in excess of £10,000 so planning a wedding needs careful consideration (and saving). Of course, there are ways of doing it more cheaply, and often the small, personal weddings are the ones that are the most special, but chances are, you will need to save for the big day.
Buying a car: After a house purchase, buying a car is the next biggest expense and many people obtain a car on finance, or have to save for the purchase.
Investing and ISAs
It is a good idea to use your personal ISA allowance in order to invest in the stock market or save a cash sum. If you choose to invest, you can have a tax free allowance of £10,680 in which to do so, or £5,340 in cash can be saved in a high interest savings account.
Learning to budget effectively will help you to achieve your goals, whether they be saving for that once-in-a-lifetime around-the-world-holiday or just general day-to-day living without dipping into the overdraft.
A key tip is to use a budget planner, which will allow you to input your incoming salary and outgoing spends onto a spreadsheet, so you can analyse where your money is going.