Five steps to planning your finances (put simply)


Rory Brand

Rory Brand

Financial Planner


Planning your finances can take a backseat in life. Whether you are just starting out, have a busy family life, hectic career, or are dreaming of retiring in the not so distant future or are already there, it is very easy to put finances in the “I’ll get round to it” pile. 

Thankfully, making a plan can be less daunting than you think, and I’ve outlined below five steps to help.

Step 1. Know where you are going

Without an objective, how will you know when you achieve it? So, start with thinking about what you would like to achieve, and you are more likely to get there!

Write it down, discuss it with those around you who are part of the same journey or you might be going in different directions. 

Accept your destination and direction is not static so will need regular reviews.

Step 2. Know what you have

Do you have a full understanding of what you currently have?

You probably know how much is in the bank give or take a few digits, and you probably know how much your salary is and your mortgage payment, but do you really know the full picture?

To really understand your finances, you need to know:

  • What is your net pay?
  • What gets paid into your pension?
  • How much is outstanding on your mortgage?
  • What is your interest rate?
  • How much will your state pension be?
  • How much do you save?
  • Could you save more?
  • How much do you spend? (The scary question!)

The list could go on, but I am sure you get the picture, you need to understand how much you have, what comes in, what goes out and how does it work together.

At different stages of life different numbers will be important and as mentioned above in step 1, you need to regularly review these numbers as they change.

Step 3. Know your gap

You have worked out where you want to go, you have worked out what you have, so what is stopping you?

This is your gap.

Step 4. Address your gap but make it efficient!

If you have a long-term plan with a gap you need to address it. Doing nothing will achieve nothing.

Your goal, attitude and circumstances will dictate where you save your money. But by saving in the right place, at the right time you will increase your net returns and shorten your journey.

There are many different ways to save from cash, such as: pensions, ISAs, Bonds, General Investments, Property, Lifetime ISA, EIS and VCT. They all have different pros and cons; get this right and you will be closing your gap efficiently.

Step 5. Have a Plan B 

Recognise your financial shortcomings.  

Once you know where you are going, what you have, what your gap is and how you are going close it, the key question becomes: What could bring this tumbling down?

Committing a small amount of your net income towards a Plan B could ensure that if life derails Plan A, you will still be on track financially if your income was to stop or decrease.

Next steps

Hopefully these five steps help you start thinking and I, and my colleagues, would be happy to continue the conversation with you. This is what we do with our clients, we try and understand where you are going, recognise what you have and how far you have to go and then help you on your journey in the most efficient way. Part of looking after you is spotting what could go wrong and addressing it.

We all need advice (even Financial Planners) and speaking with someone to help you on your way could help you see it from a different angle.

Make a plan, get help making a plan, or hope for the best? I know what I am doing.

If you would like to discuss your plan and journey, please contact me or your usual Johnston Carmichael Wealth Financial Planner.