You can never be totally prepared for what life will throw at you, but you can make sure you are financially prepared to achieve your goals and tackle life’s ups and downs. To make a big purchase or prepare for a comfortable retirement, you’ll need a sizeable pot to fund it. But don’t panic! Whether you are buying a car, a house, or paying off your student debt, we have compiled this list of our top five tips to help you get prepared for meeting your financial milestones.
1. Set your goals!
To effectively build your wealth, you first need to set your objectives and timescales. But make sure you are coming up with feasible and clear targets! Here are some tips for developing your goals:
- Make them specific; set clear financial targets (e.g. £200 in my savings account)
- Give yourself a deadline. This will help you be more vigilant with your savings and you can always change it later if you need to (e.g. £200 in my savings account by the end of 2021)
- Write them down! Writing your goals down will solidify them and keep you focused
Want to reach a goal like paying off your student debt or putting a deposit down for a house? Do your research. The more you know, the better decisions you can make. There is an abundance of information online to help you plan and make the best decisions. But make sure it comes from a reputable, qualified source.
3. Saving vs Investing
For your short-term goals like budgeting, birthday presents or holidays, you may want to consider saving your money (rather than investing) as it presents a lower risk and you may see quicker reward. Make “savings” a regular monthly amount in your budget and soon it will become a great money habit. But, when preparing for your long-term goals, investing can be a good way to diversify your income streams and build your wealth in the long-term. Investing can also be more tax efficient and has the potential for much larger returns than saving, if done over a longer period of time. Make sure you choose the most appropriate method for each milestone.
4. Strategise and plan
Good budgeting is a useful tactic to keep your spending in check and keep you on track to your goals. Consider what planned expenses you have and factor in some extra cash for those unexpected costs that will crop up. Sign up to Maji with your employer to use our financial planning tool, or check out this template to help you get started.
5. Ask for help!
Planning your finances can be confusing and sometimes there is too much information online! Seeking professional advice from financial experts can ensure that you get the most out of your money and have an effective long-term plan. Here at Maji we can help cut through the jargon and set you on the path to financial freedom.
What about retirement?
Retirement is one of life’s biggest financial milestones. With the average UK retirement age at 66 and an average life expectancy of 81 in the UK, that’s 15 years of retirement during which you will mostly need to rely on your pension pot. To live a “minimum level lifestyle” in retirement you would need £10,200 a year; this is already more than the maximum State Pension of £9,339.
Increasingly, people are spending time travelling during their retirement, with Which members spending £4,640 annually on holidays. So, if travel’s part of your retirement plans, you may need even more money to fund your ideal lifestyle. Getting some financial advice and maximising your pension pot can help to prepare you for a comfortable retirement without too many money worries. By reducing your fees, tracking all of your pension pots and reviewing your pension investment choices regularly all help to boost your pension. Think about what you want to do in your retirement and check out Which’s useful planning tool to see how much you will need to save in preparation. Or, plan your retirement in more detail with your Maji account.