4 Ways to Future-Proof Your Financial Planning in 2022
If like millions of people across the UK, you only recently started saving and investing, you might be looking for some advice on how to do it right. After all, we are told that we should be saving and investing as much as possible, even though very few people have the financial literacy and expertise to get started on their own.
One thing that all of those investment gurus and podcasts often forget to tell you is that saving and investing can actually be expensive.
Your investments may (and most likely will, at some point) lose value. On top of this, there are the fees, taxes, and never-ending inflation that can put even the most well-planned saving strategies to rest. With that in mind, we thought we’d share our tips for future-proofing your financial planning in 2022 and beyond.
1. Be honest with yourself
The path towards financial independence begins with honesty. You must gain a clear idea of how much you make, how much you save, how much you owe, and how much you have if you wish to build a workable and realistic saving and investment plan. Audit your bank accounts and dig through those credit card statements. Make a spreadsheet detailing your expenses and outgoings from the past year and determine how much income you can realistically spare. You might encounter some nasty surprises, but doing this now will save you a lot of trouble later on.
2. Prioritise your credit score and debt
Debt is a crushing weight that can act as a drain on any savings ambitions. While not all debt is bad, many types of debt are corrosive and should be eliminated before you start saving. For example, any outstanding debt from high-interest credit cards or short-term loans should be paid down before you do anything else. The interest on these will compound over time, meaning that you will spend more servicing your debts, the longer you leave it. Paying this off quicker will also improve your credit score, which will make it much cheaper for you to take on future debt.
3. Reduce tax liabilities
Many first-time investors are disappointed when they learn that their responsible saving comes with a price tag attached. Many investment vehicles can come with hefty fees attached that will seriously undermine your ability to build a solid financial future. Meanwhile, the tax liabilities on investment assets can easily offset your profits if you do not plan carefully enough. This is why you should always choose tax-free investment vehicles to park your savings in. For instance, choosing stocks and shares ISA account will allow you to invest your money into various funds, with the UK government not applying capital gains tax on any profits made. Simply choosing to invest in an ISA is an effective way to automatically remove future tax liabilities on your investments.
4. Know your worth
There is only so much saving and investment you can do with your wages, no matter how much you earn. Any lifetime financial plan should include concerted efforts to increase your income, which can only be done when you have confidence in your self-worth. Do not be afraid to ask for that raise, as you may be pleasantly surprised when you do ask. In your next job interview, resist the urge to give a lowball salary offer in the misguided hope that this will improve your chances of landing the job. When you are confident in what you are worth, it is much more likely that you will be able to build a healthy financial future.
By following these simple steps, you can future-proof your finances in 2022 and beyond. Make sure to consult our expertly-curated Finance guides to learn more about everyday financial planning.