When you are a student, or you first start work, it may seem like all you can do is to pay your rent and buy food. Budgeting is often a week-to-week activity, or at best month-to-month. If you have any money left over, there is always something that you need to buy—even if it’s only a celebratory coffee. The future seems a long way away, and something that can take care of itself.

However, as anyone over 40 will tell you, the future arrives quite quickly. Wise is the person who looks ahead in life, especially financially. A little care and financial planning early on in your life and career can avoid major headaches later. Ongoing financial planning and goal setting at different stages of your life can also ensure that you have considered the potential demands of various scenarios and can cope with whatever life throws at you.

This page looks at various issues related to financial planning at different stages of life, and also examines the issues that you might want to consider at each stage.

Why Should You Do Any Financial Planning?

When you first start work, you may have various money or other worries, such as:

• Finding somewhere to live that is within your budget, but still acceptable;

• Having significant student debt that you will have to start paying off before too long, if you have not already started; or

• Being on a ‘zero hours’ contract that offers very little by way of protection such as health insurance or employer pension contributions.

You may therefore feel that you have better things to worry about than your retirement or other long-term financial planning. It is very easy to decide that the future will take care of itself, and that you will never be able to afford to retire anyway.

However, this is a bad idea. In many ways, this is actually a very good time to start thinking about your financial goals in life.

Why? Because habits built now will stay with you for a long time, and starting early will mean that you can build up a substantial savings pot on smaller monthly contributions. There is also the element that setting goals helps you to think about where you want to be in life—and therefore take steps to get there.

Setting Financial Goals

The first step in long-term financial planning is setting out your financial goals.

Take time to think about where you would like to be in life, in financial terms. Be as precise as you can and provide as much detail as possible. Consider:

• What standard of living would you like to achieve, and by when? Consider what hobbies and activities you want to do, the type of holidays you would like to take and how often, and where you would like to live. How much spending money do you want to have each week/month/year?

• Do you want to own your own house, and by when? Consider what is realistic in the area in which you live and work—or if you would be prepared to move areas and change jobs.

• If you have children, or you want to have children, what do you want and expect for them? What do you hope to be able to provide by way of schooling, extracurricular activities, holidays and so on?

• At what age would you like to retire? This may seem like a long way ahead, but it helps to know where you are aiming.

You may find it helpful to read our pages on SMART Goals and Setting Personal Goals to ensure that your goals are SMART: Specific, Measurable, Achievable, Realistic, and Time-bound.

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Planning to Achieve Your Goals

The next step is to consider what you need to do to achieve your goals, and by when.

It may be helpful at this stage to break your goals down into small sub-goals. For example, if you wish to own a house by the time you are 40, what savings would you need to have accrued by the time you are 30? 25?

You should also consider how this relates to your other goals. If you wish to accrue savings, you may need to pay off student debt first. You should therefore consider how you can do that faster.

Crucially, this stage of the process needs to test your goals against your lifestyle and current income. Are your goals realistic under those circumstances, or do you need to make substantial changes?

It is advisable to think creatively about what you could do to achieve your goals. There is always more than one option. For example, if you identify that you need some further education to increase your earning potential, check with your employer. They may be prepared to pay for some additional training, especially if it relates to your current job—and that could make it easier to negotiate a higher salary.

You may also find it helpful to look at our pages on Spending Less Money and Making More Money, to give you some ideas for ways to increase your income or decrease your outgoings.

At the end of this step, you should have a clear idea of what you need to do, both now and in the future,to achieve your financial goals.

Moving Through Life

Financial planning and your goals will obviously change as you move through life.

Different aspects of life and your finances will have a different level of priority at different stages (see box). For example, during retirement you will probably not be too worried about saving for a deposit on a house.

It is therefore important to keep reviewing your goals and making sure that they are still relevant.

Getting Professional Help

Long-term financial planning is always a complex process.

As you move into and through different stages of your life, you may want to discuss your finances with a professional independent financial adviser (IFA). They will be able to help you ensure that your money is in the right place, and that you can access it when you need it. Employing a professional is almost always worth the money, because they have much more knowledge and understanding than most lay people. They may also have access to different investments.

Even if you think you know what you are doing, it is worth consulting a financial adviser to see if they come up with any new ideas that you might want to consider.

Building up a good relationship with a financial adviser over a long period also means that they get to know you and your financial situation. This will ensure that their advice is as helpful as possible, and matches you, your situation, and your attitude to risk.