How to plan your financial future without a financial adviser

Jade Hare

by , Freelance Writer

at PensionBee

09 Nov 2015 /  

How to plan your financial future without a financial adviser

If you’re feeling a bit lost with your finances, then turning to a financial adviser is an obvious option. But advisers can be expensive, and if your finances are relatively straightforward and your main aim is to get on top of your spending and make a savings plan, then it’s quite possible to do it yourself. Set aside a weekend and follow our quick start guide to DIY financial planning, also making use of the wealth of online tools out there, including downloadable budget spreadsheets and price comparison tools.

1. Get to grips with your income and outgoings

Start by making a spreadsheet that shows your income and your expenditure. You’ve probably got quite a clear idea of your monthly income, but gather your last few payslips anyway to check your take-home pay after deductions for tax, National Insurance, pension contributions and student loan payments. Remember to add on any extra income that you receive, for example from benefits, child maintenance, or pension payments.

Calculating your expenditure is always going to be a bit more complicated. Start by writing down the value of all your regular monthly payments with the help of your bank statements, online banking log, or utility bills. Common household payments include:

  • rent or mortgage payments
  • debt repayments
  • utilities like gas, electricity and water
  • council tax
  • internet and landline
  • mobile phone contract
  • music or video subscriptions
  • satellite TV
  • insurance (house, car, life, pet etc.)
  • childcare
  • gym membership
  • parking permits

Next you need to list other costs, that are likely to vary more significantly from month-to-month. You should be able to do this by referring to receipts and your online banking record, but if you find it difficult you could try keeping a ‘spending diary’ over a month instead. The kind of costs you’ll be taking into account here include:

  • food
  • transport (e.g. fuel and train fares)
  • clothes
  • car running costs
  • pet care
  • household items and appliances
  • leisure (cinema, theatre etc.)
  • miscellaneous

2. Consider your long-term goals

Getting a snapshot of your current financial situation is hugely helpful and a big step on your financial planning journey. Now you can see clearly where you’re spending your money, you can think about your long-term financial aims and how you might need to change your spending and saving behaviour accordingly.

If you’re planning a big, expensive life change like buying a house, getting married or having a child, then you need to think carefully about how much money you’re going to need and how much time you’ve got to save it.

Even if you don’t have a big milestone ahead of you, your financial goal might be to have money for a nice holiday or a new car. If this is the case, put a figure on it, and keep this aim firmly in mind when you’re overhauling your finances.

3. Trim your spending

Once you’re clear about how much you’re trying to save, it’s time to figure out how to get there. Don’t be unrealistic and aim to deny yourself all pleasures in life, but look at your expenditure spreadsheet and think about how you might be able to cut down: could you shop in a less expensive supermarket, car-share to work or even just skip your daily latte? Also consider switching your utility providers if there are better deals available (there are several website to help with this), and set up direct debits if you currently pay by a different method.

4. Take stock of your debts

What debts do you have, including any credit cards, loans and overdrafts? If you’ve got money left over each month then it’s a good idea to pay off these debts before you start saving, as the money you’re spending on interest is likely to outweigh the amount you’d make on your savings.

Stop using really expensive credit like store cards, and possibly consider transferring your credit balance onto a card with a 0% rate to give you a break from interest payments. Exercise caution if you take this option though, as when the interest free period ends, you’ll often be switched on to a really high rate if the debt isn’t paid off.

5. Set up your savings

In light of your long-term goals and considering that it’s always good to have a cushion for emergencies, set yourself a realistic monthly saving target and set up a regular payment for moving money from your current account to your savings account. An ISA is a really good option, as it offers tax-free saving. The limit to the amount that you can put into an ISA is currently £15,240 for the tax year 2015/16.

The other main method of tax-efficient saving is to save into your pension. The standard amount of tax relief is a 25% tax top up for basic rate taxpayers, meaning that if you put £8,000 into your pension pot, HMRC effectively adds another £2,000. PensionBee can help you take control of your retirement saving by finding your old pension pots and combining them into a single, low-cost plan.

6. Financial planning for higher sums

If you’ve followed these steps but you’ve got substantial savings that go far beyond your ISA allowance and you’re already paying a significant amount into your pension, there are of course many options available to you. You could put money into property, invest in shares or bonds, or even consider peer-to-peer lending.

The decision on what to do with your money will largely depend on how much risk you want to take and how much access you need to your money. If you’re dealing with large amounts of money or your financial situation changes significantly, this could be a good time to seek professional help.

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