Financial wellbeing ultimately comes from achieving financial security and independence. When you’ve reached a state of financial wellbeing, you’ve got to a point where you have a sufficient level of income for your lifestyle needs, enough capital to give you peace of mind and the knowledge that whatever happens you, your family and business are fully protected.

Most people have lifestyle goals that are directly related to their finances. So why is it then that some people have the ability to live the life of dreams and pass on their wealth successfully to the next generation, but others face the prospect of selling their home or worry about health and care fee costs, and leave behind a tax bill for their loved ones to deal with?

Tangible and realistic goals

Regardless of what life stage you are at, you are likely to have some short, medium and long-term financial and lifestyle goals. Setting tangible and realistic goals, following them, tracking and reviewing your progress is the key to success in achieving them.

If you are married, it makes sense for you and your spouse to both share the same financial and lifestyle goals. Otherwise, achieving them will be almost impossible. It’s important to develop your financial and lifestyle plans together, and review your progress together to make sure both of you are contributing to the same outcomes.

How much money will I need?

Determining what your short-term, mid-term and long-term financial and lifestyle goals are is the first step. This may include planning for that dream holiday, buying a new property, university savings for your children or grandchildren, and retirement savings. Once you’ve both agreed your financial and lifestyle goals, the next step is to determine a good estimate for how much money you’ll need for each of them.

Determining an accurate amount will involve clearly identifying each of them. So for example, do you want to pay for your children or grandchildren to have a private education? If you are saving to pay towards your children’s or grandchildren’s university fees, what percentage do you want to pay? Your retirement savings needs will depend greatly on the lifestyle you plan to lead once you are retired, as well as when you plan to retire.

What savings goals should I set?

It’s important to prioritise each of your financial and lifestyle goals in order of importance, and then determine how long you have to save or invest for each of them. Retirement could be many years away, but your short-term goals could be in a year or two. Next, estimate how much interest or capital gains you’ll expect to see from saving and investing your money. While capital gains, or growth, are never guaranteed, an estimated average can be used for these purposes.

When you set your financial and lifestyle goals, don’t just pick an ambiguous number. Look at how much you’re earning, what your expenses are, and determine how much you could realistically save or invest each month. You should have both a monthly and a yearly savings and investments goal, and ideally they should align based on your overall total wealth solution.

Do I have sufficient emergency funds in place?

It’s no surprise that when life presents an emergency; it threatens your financial wellbeing and can cause tremendous stress. Are you currently living without a financial safety net? How would you cope to get by financially without running into a short-term crisis? If you don’t already have a rainy day fund in place, this should be the first savings goal on your list. Your emergency fund should be sufficient enough to cover at least six months of your outgoings. This should include all of your living expenses, and the expenses of any dependents you have.

Where should you keep your emergency savings? If you already have an emergency fund, how does it fit in with your goals? Being prepared with an emergency fund gives you confidence that you can tackle any of life’s unexpected events without adding money worries to your list.

Do I know where my money is going?

Are you tracking your expenses? If you don’t know how much you spend in a month, that will seriously hinder your ability to budget. That’s why tracking your expenses is so crucial. Make a budget plan you can stick to. But making a budget plan and making a budget plan you can follow are two entirely different things. This is why tracking your expenses is important and it can inform your budgeting choices.

Ask yourself: How would I cope with unexpected car problems or medical bills? Do I know where my money is going? Am I in control of my spending? Have I prepared a budget plan? Provided you stick to it, a budget plan will help you keep on top of your spending and make sure you can identify wasteful expenditure.

Is my family protected if the unexpected were to happen to me?

We can’t predict the future. However, we can help our loved ones by planning for it. It’s not just you that your financial planning has an impact on. We all intend that our plans will come good. But, making sure that your family – or your business – can cope if you fall ill or were to die unexpectedly is something we can too easily put to one side.

Would my family or business find themselves unable to pay the bills if something were to happen to me? This is why it’s essential that your financial and lifestyle goals are fully protected to ensure that an outstanding mortgage and any liabilities would be paid off, and your family would continue to receive an ongoing income if the worst were to happen. Should an unforeseen event occur today, am I adequately protected? If not, take action now.

What do I need to invest for? What do I want to invest in?

When it comes to building an investment portfolio, you should have specific aims that reflect your risk tolerance, time horizon or asset class preferences based on your financial and lifestyle goals. Do you have plans to buy another property, or to invest in a new project or business venture? Knowing how much of a role you want to play in selecting and managing your investments can help you choose the approach that aligns with your investment goals.

Your investing preference can also impact the investment products and offerings you might choose. If you feel you don’t have the time or experience to monitor your portfolio balances so they stay true to your original target goal allocations, you should look to choosing fund types that take on some of that work. Ask yourself these questions: How experienced am I with investing? How much assistance do I need? How much control do I want over my investments? Do I prefer to be in charge, or do I want my investments managed for me?

How can I further grow my wealth?

Whatever the origins of your wealth, it now provides for even greater growth opportunities. An effective total wealth solution focuses on long-term goals while managing risk along the way. The old adage ‘Don’t put all your eggs in one basket’ applies when you are looking to further grow your wealth. An appropriate diversified asset mix is key to investing wisely.

To further grow your wealth by investing, this involves buying financial assets such as shares, Government and corporate bonds, and property. The main reason for investing and taking on additional risk you wouldn’t have if you kept your money in cash is the hope of making higher returns. The aim of investing for growth is that the investments you put your money into will increase in value over time. Am I prepared to accept a higher level of investment risk? Have I set my investment goals based on my financial and lifestyle goals?

What will my children’s future hold?

What action do I need to take to provide my children with an independent education? The thought of paying for school fees for five, ten or even fifteen years can look like an insurmountable mountain to climb. Which schools should I apply to for my children? Do I want my children to board or not?

Also, no matter how harmonious you may want your family life to be, some disruptions and disturbances are inevitable. When they occur, they may not only be stressful, they can also lead to financial worries and difficulties. How would my family cope if I were no longer around? Have I made provision for every possibility? If your family could end up becoming financially vulnerable, you need to make provisions sooner rather than later.

How can I support my children and parents?

With longer life expectancies and people starting families later than ever, many of us can expect to become part of the ‘sandwich generation’ at some point. Will I be faced with the task of caring for my elderly parents alongside my dependent children? Finding yourself squeezed between – and often by – these two generations can be very stressful. As well as facing time pressures, chances are your finances will become very stretched, too.

Do I expect to have to financially support my parents in later life? Do I have plans in place if I need to care for my parents, while also trying to make financial provision for my children as they enter adulthood? Balancing the demands of raising and supporting your children and worrying about your parent’s independence and wellbeing without planning is difficult. The trouble with being stuck in the middle is that you run the risk of neglecting your own self-care while attempting to help everyone else. It’s essential to have a plan of action in place to care not only for your ageing parents and children, but for yourself too.

How do I talk to my grown children about how to handle the money they will inherit? How can I ensure the wealth will last for them and beyond?

You may have accumulated wealth after many years in a successful career, from the sale of a business or by receiving a substantial inheritance. But when children inherit wealth it can pose plenty of questions, particularly around how they should best invest, manage and preserve these assets. There is also a common concern that children from a wealthy background lose their motivation if they are aware of the scope of their family’s wealth and a likely inheritance.

While access to and knowledge of this wealth can be a positive thing, there’s always the risk that the security provided by the money might lead to complacency and entitlement. Do I have concerns about how best to prepare my children for their inheritance? Are my children prepared to receive such wealth? Have I had an honest conversation about money with them before they inherit these assets?

Do I have the right plans in place to retire when I want?

What should I be saving for retirement to live the life I want? Do I know my exact number? The reality is that there are countless factors that will impact on how much you will need in retirement. Therefore, determining your target goal for retirement savings can be more challenging than it may seem. So what is the solution? Instead of thinking of your retirement savings goal as one big number, look at breaking this number down in relation to your life goals.

For instance, if you have any idea about where you might want to live in the future, or in what type of property, that can go a long way towards long-term retirement planning. Setting a retirement goal doesn’t necessarily mean sticking to one large monetary goal; instead, aim to incorporate retirement savings into your goals for today. How much money will I need to save in advance to deliver the income I want in retirement? How will I spend my time in retirement? How much will my leisure and travel pursuits in retirement cost me?

Time to get motivated to reach your personal and financial goals?

Setting personal and financial goals makes it more likely that you’ll save and invest for – and achieve – every financial and lifestyle goal. You’ll be more motivated to reach each of them since you can gauge their progress. And you can consider the time horizon and risk level separately for each goal, and invest accordingly to ensure they form part of your overall total wealth solution.

Seek Professional Advice

Knowing the best way to set and achieve your financial and lifestyle goals can be difficult. Our independent financial advisers can help you with this journey. For a no cost, no obligation initial meeting, contact your nearest IFA here.