A financial adviser can help you to build your wealth, but it’s a good idea to get the basics in place as a starting point.
Deal with your debts
If you’re paying more interest on debts than you’re earning on savings and investments you’re losing money, so it makes sense to pay off as much debt as possible. There are exceptions to this very general rule – for example, you may want to keep a balance on a credit card to take advantage of a 0% deal, or keep your Student Loan running because it offers generous terms. But generally speaking it makes sense to try to clear your debts before you start trying to grow your wealth.
Spend within your means
There’s ultimately only one way to grow your wealth and that’s to spend less than you earn. So build a detailed list of your essential outgoings and work out how you can limit them. There are online tools that can help, such as those available on the Money Advice Service website.
Build an emergency savings fund
Before working on any other financial goals, it’s a good idea to build up enough savings to cover at least three months of expenses in a cash savings account. This will ensure you can make ends meet (at least for a while) should you suddenly lose your job or become unable to work because of illness. It’s especially important if you have a mortgage, because missing multiple payments on that could put your home at risk of repossession.
Take advantage of entitlements
If you’re not using all the tax allowances available to you then you’re effectively throwing money down the drain. One of the simplest ways to start sheltering both cash and investments from tax is by opening an Individual Savings Account (ISA), so if you have enough surplus income to start building up a nest egg then you should put this type of account at the top of your list for consideration.
Protect yourself from disasters
The best financial plan will count for nothing if you can’t work for the long term because you’re seriously ill, or because you die before your time. An insurance policy (such as life cover and/or critical illness cover) can provide you and your family with a safety net.
Identify specific goals
Thinking in terms of life goals, such as buying your first property or retiring, will help you ensure that the money you need at specific points in your life is available at the right times.
Your plans will inevitably change as you grow older, but by thinking periodically, you should find you only need to correct your course every now and again.
Consider professional advice
All financial advisers take their clients through the above steps before helping them to build long-term strategies. They’re the best-placed experts to ensure you don’t forget important precautions, miss opportunities to save money or head off in the wrong direction in pursuit of your goals. If you want to find out how a professional adviser could help you take your financial planning to the next level, check out Advice Matters for everything you need to know.