Everybody is talking about Alex Salmond’s plan B. Make sure you have a plan B for your financial future, says Rhian Morgan, a financial planner at Acumen Financial Planning in Aberdeen
The second referendum debate between Alex Salmond and Alistair Darling saw the first minister readdress his views on a plan B for an independent Scotland’s currency.
Whether Scotland becomes independent or not, it is important that we all as individuals have a plan for our own financial future.
This should include a plan B if our initial objectives require adjusting.
The key to securing your goals and realising your objectives is planning.
Create a financial plan, including short and long-term goals, save and invest regularly, use available resources and protect yourself and your family should goals become unattainable.
A financial plan should incorporate you and your family’s needs and objectives, and ascertain where you are now, where you want to be and when and how you are going to get there.
Your goals can then be categorised by timeframe and priority.
Studies show that people who put their goals on paper are more likely to reach them.
It is important to be realistic and find a balance between expected future lifestyle and the required level of saving.
Take time to look at your income and outgoings in more detail to establish how much you can afford to save on a regular basis.
Lump sum savings are a good way of planning for your future but by saving regularly you get into the habit of putting money away.
In addition, investing your savings in the stock market on a regular basis carries the advantage of reducing the potential risk through pound cost averaging, where you invest when markets are both high and low.
Think about where your savings should be held.
For example, a cash-based savings account or cash ISA (individual savings account) might be the best home for savings for a short-term goal.
A diversified portfolio of investments should be considered for a long-term goal as you have time to ride out the peaks and troughs of the market and inflation-proof your savings.
Whether it be an employer’s pension scheme, available annual tax reliefs, allowances and exemptions, or simply investing in your own potential, it is important to recognise where you can add value to your plan.
Think, too about protecting your family. If a life event occurs which will have an impact on your ability to achieve your financial goals, it is important to have insurance in place so that plan B is not too far removed from the original strategy.
Reviewing your plan regularly will also increase the likelihood of you achieving your goals as you will be able to make small adjustments to allow for changes in circumstances or legislation.
Your investments will require revisiting and rebalancing on a regular basis.
Rebalancing your portfolio every year is the key to maximising returns and minimising risk.
Have the confidence to persevere with your plan, even in hard economic times.
Sometimes the biggest risk to achieving your financial goals is deflecting from your plan due to external influences. Your plan is yours and no one else’s.
A financial planner can help you to determine the amount you need to save each month. They can also help you determine your tolerance for risk and map out a comprehensive plan that will help you achieve your financial goals.