2020 has been somewhat of a rollercoaster and it is not only the obvious health concerns that people are experiencing as a result of the pandemic. This has also been a year of financial uncertainty, particularly for those that are self-employed with many people finding their income significantly reduced or even completely dried up with no clear idea of what the near future looks like.
Covid-19 has brought to the fore the importance of proper financial planning as it has shown that the unexpected can happen and things can very quickly change and create serious financial difficulties, especially for the self-employed where your income can fluctuate.
Objectives & Timescale
When it comes to financial planning, it is recommended that you use the services of an independent financial advisor that will be able to advise you based on your individual situation and goals. A financial advisor will always tell you that it is im-portant to set objectives and that timescale is an important factor to keep in mind when it comes to planning. This is so that you can determine the best path of ac-tion as well as working out what is realistic when you factor in risk tolerance.
Leading on from this, risk tolerance is another important aspect to keep in mind when it comes to financial planning. To determine whether you are ‘cautious’, ‘bal-anced’ or ‘adventurous’, you need to consider how you feel about risk, how much risk you can afford to take and how much risk you need to take.
How Much to Invest/Keep Back
It is difficult to know how much you should invest and how much you need to keep back and it will be different for every person. While investing is great for looking ahead and building long-term wealth, the coronavirus has proven that it is im-portant to have quick access to funds if you need them and why rainy day saving is so important. This is particularly true for the self-employed with so many people seeing their income completely dry up and the future looking uncertain, so it is al-ways best to be cautious and make sure that you have an emergency fund that you can easily access.
Smart financial planning has always been important for the self-employed, but never more so than in 2020 due to the coronavirus pandemic. Working out what your goals are and working with a financial planner is intelligent and could help you to feel more in control, achieve your goals and avoid difficult situations.