How to financially set yourself up for the future

If you are asking yourself How To Financially set yourself up for the future, we have distilled it down to 6 simple steps so you can get started on your own.

We like to think a lot of what we do here at Metis Ireland, helping families set themselves up for the future, is simple but not easy. There is so much noise and myths around finance in the News, the papers and our social media channels like TikTok, so here are our 6 simple steps.

Step 1: Develop a solid Financial Plan

The foundation of setting yourself up financially for the future begins with a well-structured Financial Plan. This plan should consider your current financial situation, future income projections, and expected expenses. However, at its core this should be a values-based plan.

This means that you first need to ask yourself what do I want my future to look like.

Do you want to stop working at 50? Maybe you just want enough financial freedom so you can spend your time how you want and with who you want. Most of the families we work with don’t ‘retire’ when they achieve financial freedom, but they do focus on a greater work/life balance.

Start by setting clear goals for your future and breaking them down into manageable milestones. Working with a financial planner will help identify how much money you’ll need to support your desired lifestyle during retirement, and will consider factors such as inflation, healthcare costs, and unexpected expenses.

Step 2: What’s your number?

If you want to set yourself up financially for the future, understanding how much you’ll need to save is crucial.

A good starting point is the rule of 300. You take your expected monthly lifestyle expenses and multiply by 300.

Let’s say you’ve worked out that you’ll need to spend €5,000 per month to live the life you want.

€5,000 * 300 = €1,500,000.

Therefore, you’d need at least a pot of €1.5mil if you wanted to maintain your lifestyle expenses in the future.

There are plenty of caveats to using this rule of thumb, such as tax, inflation, investment returns, and unexpected or milestone expenses, but it’s a decent jumping off point.

Step 3: Calculate your required investment return

The earlier you retire, the more likely you are to need higher investment returns. And you need to think in real terms.

We can all see the effect of inflation over the last few years, and this can decimate your savings unless you invest in assets that beat inflation. Historically, the global stock market has beaten inflation by about 6-7% p.a. if you stick with it for the long term (which isn’t easy to do on your own).

You will need to factor in market volatility and your own attitude to risk. Markets don’t go up in a straight line and reacting to short term market corrections is probably the biggest behavioural threat to your financial plan.

Step 4: Understand your lifestyle expenses

It is important to set yourself up financially for the future but it’s also important to find a balance between saving and enjoyment. Evaluate your current spending habits and identify areas where you can cut back without sacrificing your quality of life.

Get rid of expenses that don’t add value but be careful not to ‘over save’. You need to enjoy the journey along the way.

Just like going to the gym or starting a new diet, if you try to cut too much too fast, you’ll more than likely pack it in after a while and end up with a worse outcome. We ask the families we work with to be conscious about their spending rather than implementing a strict budget.

Step 5: Consider alternate income streams

Even a small amount of extra income in retirement can go a long way. Remember, you’re more likely to have your mortgage cleared and your children raised, so a lot of your current expenditure may no longer be relevant.

A lot of people who have set themselves up financially for the future still do some self-employed work, using the skills they have honed over their career. Start thinking about how you could use your skills and expertise in retirement.

Can you do some contracting or consulting work with other business that still give you the flexibility and freedom to be master of your own calendar?

Step 6: Continuously monitor and adjust

Financial landscapes change over time and so do your goals and aspirations. It’s therefore vital to regularly review and adjust your financial plan.

Life events, market fluctuations, and personal goals may require you to make changes in your investment strategy, savings rate, or retirement timeline. Staying flexible and adaptable will help you navigate challenges and seize new opportunities as they arise.

What next?

Setting yourself up financially for the future is an attainable goal for those families willing to put in the effort and discipline. By following these logical and simple steps – from crafting a robust financial plan and calculating your retirement nest egg to managing expenses – you can set yourself up for a long and dignified future.

If you’d like to talk more about setting yourself up for the future or want to get your own personal plan in motion, please don’t hesitate to give us a call on 01 908 1500 or email us at info@metisireland.ie.