Planning your financial goals amidst uncertain times

Let's roll back a bit up to April 2020. We were in the throes of the first covid pandemic. I had just recently bought a new home, significantly increasing my monthly outflows, and depleted our on-hand savings to the bare bones. My company decided to introduce pay cuts that affected me, and right after that, my wife was put on furlough. Collectively our income had dropped by about a third. 

In the previous 2 months, the market has dropped significantly, taking down our life time savings by about 14%. This assumes very generously that the value of our newly purchased house was intact - in reality I felt that my entire equity on the house would have been wiped out if I had to sell it then, not that I had to. And if I had to factor that in, the damage to our financial wealth was probably a lot worse off.

On top of it, there was always a fear that things could get worse - I could lose my job which would have meant I would have had to move back to India, forcing me to sell the house I had just purchased. Of course, we were thankful that we were healthy in the midst of a pandemic and the family was together, but anxiety and uncertainty were definitely prevalent moods. Things were not good, to say the least.

The conditions today are somewhat similar - there is economic uncertainty, and there is bound to be some stresses on personal finance planning for many of us. The entire economy isn't shutdown, and hence it is likely that the bruises we face will likely be far less painful than in 2020, but the extent of damage will also depend on personal circumstances. Some of us will likely face a far more damaging few months than others.

So, why am I writing about all this now? Because in the throes of that crisis, I put together a personal finance plan that might benefit some of the readers today. 

Right then in the spring of 2020, while everything was seemingly going wrong, I put together a Vision 2025 plan. The plan consisted of a lot of things I planned to do. These things took the form of simple goals. They went like these:

  • In 2020-2021, put away £XX in my ISA
  • In 2020-2021, put away £YY in my daughter's Junior ISA 
and so on. These goals were based on realistic estimates and didn't go over the top. I had one line item for each kind of goal (ISA, SIPP etc) and one for each year for the next 5 years.

On top of that, I created a list of simple projections. Those took the form of:
  • By 2025, my ISA corpus would be £PP
  • By 2025, my daughter's Junior ISA would be £QQ
The way I arrived at PP and QQ was to take the current value of the corpus, add up the investments I hoped to make through the goals above, and then take some very conservative growth estimates - between 3%-5% depending on the kind of investments. 

The result of all of this was a plan and a projection of what our family finances would look like in 2025. While everything looked uncertain in the present, if these realistic goals were met and the conservative projections were met, the family's finances would be okay when 2025 came along.

I am happy to say that for the past 2 years I have followed the goals to the T. I also believe I am on track to meet some of the projections, even after the recent drawdowns in our portfolio. Whether or not all of it will be met is yet to be determined, but I stay extremely hopeful.

A plan like this can give you an immense level of control in a world where everything seems to be falling apart. That's the power of simple goals and modest projections. 

If you are dealing with uncertainty in your personal finances, give this approach a try. It doesn't need to be 5 years long. It doesn't need to have too many details. It doesn't need anything complex. Just make a start and stick to it and see where it gets you to. If you are unable, or unwilling to do this on your own, get a trusted friend, or family member, or even a financial advisor to help you set something up. Something to get you started..


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