Plan to Save: How to Build your Wealth

It has not been a great decade for those with a desire to save, from recurring financial crises to the recent Brexit vote.

As earnings have also stagnated while the cost of living has risen incrementally, it has become increasingly difficult to access disposable income and build wealth.

This state of affairs was exacerbated recently, as savings rates began to nosedive following a Bank of England base-rate cut.

This will reduce the yield of standard savings accounts throughout the UK, and potentially cause many to seek out more lucrative and less familiar options.

Building your Wealth through Planning

In many ways, these relatively low rates explain why there may be some apathy towards saving in the current climate.

They also highlight the popularisation of specialist pension plans such as SIPPs, which offer greater freedom, the possibility of higher returns and lower management fees to applicants.

Whether you choose to invest in this type of pension plan or commit your money elsewhere, however, it is imperative that you have a clearly defined plan that enables you to strategically achieve your financial goals.

So what form should such a plan take? Initially, you will need to have a clear objective, as this will shape both your incremental savings goals while simultaneously providing motivation for any sacrifices that you will be required to make.

It will also guide the precise investment vehicle that you choose and the nature of your contributions, enabling you to create a more detailed plan that will determine how and when you save.

Budgeting in Detail for a Brighter Future

It is at this point that you should create a detailed budget, which includes your earnings, outgoings and the precise amount of disposable income that you can commit to savings.

This will create a timeline of your proposed contributions and enable to estimate the value of savings at different points in the future, enabling you to make more concrete plans for later life and retirement.

There are two key things to remember when budgeting, however, with the first being the need for accuracy and to deal in pence rather than pounds.

The second consideration is the need to be conservative, and estimate the minimum contributions that you can make to your SIPP or savings account.

This will leave you with accurate figures and a minimum savings goal, meaning that anything you are able to accrue in addition will be a huge bonus.

You should also be prepared to plan as far in advance as possible, as you look to identify periods of time where you may be forced to save less and adjust your expectations accordingly.

While you can never pre-empt the future, of course, this type of forward-thinking planning and a willingness to organise your finances can help you to cope with even seismic changes in your circumstances.

Tags: build your wealth, plan to save, plan to save for the future

Category: Family Finances