'Planning' means finding a balance between risk and reward that satisfies your personal preferences. And that's all it is.
You don't have to plan
Shocking, isn't it? But how much planning do you do for your life ahead? Some of us are goal-oriented and live structured, organised and focused lives. Some of us prefer to just sort of muddle along, picking the daisies on the way. And some of us do a bit of each - launching into the unknown, but occasionally taking a bit of time off to scan the horizon.
If you are not a planning person, don't do it. But don't use that as an excuse not to understand the principles of saving and investing and finding your own personal way of making those decisions - that is a basic life skill.
The case for planning
The decisions you are making on saving and investing will have financial consequences over the rest of your life. Is it not possible that if you had an understanding of those consequences you might change your decisions today?
The obvious example is that if you do not save enough early enough you will have a very constricted retirement. But there's much, much more:
- Maybe you expect to have enough extra for half a villa in Spain? In which case, if it's your dream, why not take greater risks with your investing - which may give you a whole villa in exchange for a risk of no villa at all?
- Maybe you have near-term financial goals that are important, but further out you are prepared to take more chances?
- Maybe you should be taking higher investment risks while buying more insurance against specific catastrophes?
The process of planning allows you to cycle through your options, evaluating the effect of different spending, working and investing plans to find a balance that suits you. Professional help at this point, from a qualified financial planner will save you a lot of time and trouble. So long as they are unbiased, meaning 'having no personal financial incentive for you to do one thing rather than another'.
The case against planning
You don't really want to be bothered, do you? And sometimes, as with medical check-ups, you'd just rather not know. That doesn't make it right.
The tax advantages of building a pension pot over your lifetime are considerable. It's sensible to put in as much as possible as early as possible. But without a bit of a look into the future how do you know what that is?
The good news
.......is that if you follow the teaching paths of this site, you will end up doing some planning without knowing you are doing it.
The other good news is that you can take a lot of time over it and it needn't all be hard work. Chatting with your life partner over a gin and tonic in the evening sun about matching plans for the future with financial expectations counts as planning.
In a nutshell, you may never need 'A Plan' but you ought always be doing some gentle 'Planning'.
At some point you may feel that it is worth spending a few hundred pounds to get some help from a professional adviser. We would encourage this, but make sure you get the right type of adviser.