What is a financial plan?
It is a series of sensible steps which over a period of time will allow you to achieve a financial goal.
Do I need one?
Perhaps not, but it is much more likely that you will achieve your goals if you are clear on what they are and the steps needed to achieve them. Furthermore, if you have someone to hold you accountable, your chances of succeeding are likely to be higher again.
It’s obvious but no less important: you need to spend less than you earn to move forward financially. It’s important to understand your cash flow. A well-run business has a clear idea of revenue and costs; a well-run individual’s finances should be the same. A financial plan is not going to make you a millionaire overnight. Significant wealth creation takes years. You need to be motivated to make positive changes and have a desire to take responsibility for financial decisions
Should I do it myself or use a professional?
It might be instructive to ask yourself a number of questions to help to determine this. These could be:
- Are you clear about what are your personally and professional goals are?
- Do you understand what needs to be done to achieve them, and are you on track?
- Do you enjoy reading about investments and doing research?
- Do you understand the intricacies of investment, taxation, superannuation?
- Do you have time to monitor and manage it all?
- Are you sure of what the best next move is?
- Do you have a risk management plan in place?
- Are you happy with your financial position?
If the answer to all of those questions is yes, you probably don’t need a financial adviser. if the answer is no to some or to all then you should consider speaking to one.
Won’t they just sell me a managed fund?
Sadly financial planning has a poor reputation in this regard, some of it fair and some unfair. Your adviser should help you to understand what you want to achieve and the ways you can do that. A managed fund might be a legitimate part of that. However, if you meet someone who is talking to you about a great investment within minutes of meeting you, you may need to keep walking.
What benefit comes from using a financial planner?
- Taking control of your future
- Understanding the steps you need to take to become independently wealthy
- Feeling confident making important decisions
But what do they actually do?
- A good adviser should do the following
- Goals – Identify and understand what your personal and financial goals are
- Education – Simplify and explain complex issues; prevent you from making simple errors.
- Guidance – Give professional advice on what the best strategies/options to achieve your goals are
- Advocate – Represent your interests with other professionals; solicitors, accountants, banks, investment companies
- Administration – Manage paperwork, simplify your financial affairs
- Risk Management – Through education, estate planning, insurance.
- Wealth Creation – Empower you to build your assets in a tax efficient manner
- Responsibility – hold you accountable, discourage procrastination, encourage you to be proactive
In summary, a well-run business has a clear idea of assets, liabilities, cash flow, risk management strategies and has a financial plan in place. In many respects, an individual or family’s finances are the same and should be run in a similar manner.
By Myles Thornton