How to Plan for your Financial Future - but Still Have Fun Now
Long-term financial freedom with plenty of fun along the way – here's how.
Working towards financial security doesn’t need to be boring or involve self-deprivation. In fact, planning your future is fun when it’s done right. It’s also the smart thing to do. Here are five surprisingly simple steps to achieving your long term goals, that still allow you to travel like a boss.
Daydream about your future happiness
Planning for your financial future essentially involves answering three questions. What’s my current situation? Where do I want to be in future? How am I going to get there? Work this out by setting aside some time to daydream. Yes, really!
Kick off your shoes and ask yourself: what would make me happy? Would that be retiring early and sipping sangrias in Spain every summer? Running a successful business? Owning a diverse property portfolio? Three kids and a Labradoodle? Maybe it’s all of the above. Most things are achievable if you plan well.
Start by writing down three things you’d like to have achieved within five years, 10 years and 30 years. Include even more time periods if you wish, and more goals. Knock yourself out imagining what success and happiness will look like.
Of course, priorities change over time and the future isn’t something we can pin down, but the important thing is to work out what you want, at this point in time.
It’s also worth asking yourself: what do I NOT want? For most people, it’s likely to be some form of financial dependence, whether that be massive repayments on a home or over-the-top car, living from pay cheque to pay cheque, and being unable to afford a few of the finer things in life. It could be ending up with a lot of stuff but even more stress.
Keep this document safe and look at it often. Even better – pin it to a wall.
Create a budget
You’re now in the best possible frame of mind to draw up a monthly budget because you’re focused on what you really want out of life. Of course, you still want to have fun – but that’s actually where a good budget comes in.
Draw up a list of your expenses. Is any of this negotiable? Wherever possible, find ways to eliminate or reduce expenses. Do you pay for anything that you don’t actually use? (Do you need three streaming subscriptions?) But don’t be stingy with yourself or you’ll only end up miserable and likely to have a blowout spending session!
Now it’s time to think about non-necessities, that may nevertheless be important to your overall happiness. Do you have a penchant for seeing the latest films? Travelling through Asia a couple of times a year? Stocking up on quality cheeses? All of this is what makes life great. It’s just about deciding ahead of time how much of your income you’ll set aside for these wonderful pursuits. It’s easy to spend more than you earn, so put down a figure next to each expense and spend the next three months tracking your spending and adjusting where necessary.
Finally, plan for the unplannable. Set aside a portion of your budget for incidentals – things that come up and are no big deal, but can add up to a lot if unaccounted for. If you don’t end up spending that money – excellent. Pop it in your savings account and watch it grow.
What’s left over from your monthly earnings? That’s what you can save every month. Unhappy with the amount? Go back to your expenses and see what else can be trimmed or cut out altogether.
Set up calendar reminders to review your budget every quarter or at least every six months. Things will change and that’s fine.
Pay yourself first
Often, we make great plans but don’t execute them well. So it’s important that when pay day rolls around, you pay yourself first. That means putting the discretionary amount for incidentals like entertainment into a separate account. You’re free to use this how you wish – enjoy. Just remember that when this money has gone, it cannot be topped up until next pay day. No ifs or buts.
It’s equally important to make sure that your savings make their way into a savings account before there’s time to accidentally-on-purpose dip into them. Set up both payments as scheduled transfers so that it’s a matter of set and forget. Voila – it’s painless saving. You’ll soon be used to spending a certain amount on yourself each week, so it won’t feel like you’re being deprived of anything.
Remember that it's credit
The one thing that is certain to derail the best-laid financial plans is to treat credit as though you're never going to pay it back. Sounds obvious, huh?
With a solid budget, credit problems shouldn't be an issue – but credit offers the temptation of buying something before it's affordable to you, so a certain amount of discipline is needed. Everyone is human though, so don't beat yourself up if you have the odd slip.
The important thing is to stick to the plan you've just created. Check out our Real Accounts Profiles for some real-life stories of people's experiences.
See yourself as an asset
One day you’ll hopefully own a car, a house and a small island (possibly). Maybe you’re already well on your way. But if not, and from here on in, see yourself as an asset. Trust me: invest in yourself now and it’ll pay off later.
Think about the kinds of skills and knowledge you’ll need to get to where you want to go. Often our employers don’t provide all the opportunities, so be willing to look outside your workplace to boost your skills. And don’t be afraid to take on a new job that may pay less but is closer to your dream job, or move to a city where there may be greater work opportunities. Those upfront costs are likely to be worth it in the end. Splurge on a timeless, good quality work outfit.
And remember to keep investing in your financial literacy. Buy books on managing your money. Watch videos, listen to podcasts and follow the money gurus on social media. Learning about it can get addictive.
There’s no need to let your finances stress you out. Follow these straightforward tips and take control of your future today.