Planning more important in uncertain times

Making plans for your financial future is hard enough at the best of times, but when there are lots of unknowns it is even more difficult.

There may be uncertainty around basics, such as what your income will be from one week to the next, or one year to the next, and around what your outgoings will be, such as when you transition from a working life to retirement.

At a higher level, there may be uncertainties around which house, town or country you will be living in, or which career you will have.

There is always a temptation when there is uncertainty to not plan at all, because it is too hard. Yet planning is even more important when life is uncertain. The way to deal with uncertainties is to clearly separate them from the things that are certain.

Perhaps you have your own business or you work on commission, or work irregular hours.

There is usually a base level below which your income doesn't usually fall. That is the income level you should plan with.

Regardless of what your income is, where you are living or who you are living with, there is a basic level of spending that covers the essentials of life. These are the expenses to start planning with.

It is best to underestimate income and overestimate spending in order to err on the side of caution.

You may also have uncertainty around future plans for a sum of money you have on hand.

Perhaps you are thinking of using the funds to renovate the house or set up a business.

Think of the minimum time period in which your level of certainty will increase and invest for that time frame to get a better return. As the uncertainty diminishes, plans can be adjusted accordingly.

- Liz Koh is an authorised financial adviser. The advice given is general and does not constitute specific advice. A disclosure statement is free. Call 0800 273 847. For free e-books, see moneymax.co.nz and moneymaxcoach.com.