Financial planning is the process of setting yourself and your loved ones up for a future in which you can enjoy, live comfortably and not worry about financial matters.
Many people have an idea what financial planning is, setting a budget, saving, investing money and helping people with money realise growth on that money. However, these people would be incorrect.
Financial planning is the process of setting yourself and your loved ones up for a future in which you can enjoy, live comfortably and not worry about financial matters. This is not saying that you will be throwing stacks of $100 notes around on your yacht like a rockstar.
What most people don’t understand about financial planning is it is a service for everyone from all socioeconomic and financial backgrounds. Everyone’s future is different and everyone expects different things – so when we say financial stability, that could be getting an additional residual income of $50,000 per month or $500 per week – it can be done with a cohesive financial plan, undertaken with a professional financial planner.
So, what is financial planning?
No matter what your goals are in life, it’s essential to plan ahead. A qualified financial planner can provide support to set goals and develop a practical plan to help you achieve them. As you move through life and your circumstances and needs change, a financial planner can review and tailor your plan, to ensure it’s still right for you.
Financial planning offers a solution on how to more effectively manage your finance in the short, medium and long term. This can be anything from saving from a holiday to building a comprehensive and diversified portfolio of financial assets.
Where a personal trainer works with you to help reduce weight or achieve a goal of running a marathon, a financial planner does precisely the same thing – but for your finances. With a top-line view of your situation, a financial planner will work with everything within your disposal. Household budgets, savings, superannuation, discretionary spending (such as holidays), investment options and of course planning for your retirement.
I have debt and little savings, so should I see a financial planner?
Of course! Take our example of the personal trainer once again. It doesn’t matter if you are 50kg or 150kg, seeing a personal trainer is essential for many reasons. They personalise a program for you, have you doing regular exercise within your personal circumstances and up the weights, distance and/or time as you progress – again, a financial planner is no different.
You may have several credit cards, a HECS Debt from university and be living from pay-to-pay to make ends meet, or you may be financially savvy with savings, investment properties and a portfolio of shares – it does not matter, a financial planner can help!
What is the process of financial planning?
As your financial wellbeing – as with your health & wellbeing – will largely dictate how your life is lived both now and into your future, it is important that you establish a meaningful and long-term relationship with your financial planner.
A good planner will work about setting goals, creating a plan and providing you with expert guidance, tips, techniques and opportunities to get your finances to where you want them to be. That is not to say they will make you a millionaire overnight, but they can set you up within your capacity, based on what you earn, what you can save and what you need to run your household - and of course take that holiday – while setting yourself up for the future.
You may have noticed that we keep talking about ‘a holiday’. Why? Because there is a misconception that by seeing a financial planner, they will tie all your money up and only let you have it down the road when the investments mature. Again, this is not true.
As mentioned, a Financial Planner sets your financial goals, ensuring they are S.M.A.R.T or Specific, Measurable, Actionable, Relevant and Timely.
For example, you may want enough money from 2022 to have one, overseas family holiday per year – fine. You may wish to retire by 60, with over $2 million in assets and investments outside the family home – ok. And I want to be a millionaire next week – not so good.
S.M.A.R.T objectives allow you to be real about what you can achieve within your personal situation, your risk tolerance, the years you realistically have left to work, and your earning capacity. You may now have school fees to contend with, when they are removed from the equation you can redistribute that money into your investment portfolio to maybe buy an investment property, shares or invest in a managed fund.
The key is and mentioned several times, it’s all done to a plan, with your Financial Planner, who meets with you each quarter, month, year – whatever suits you – and works collaboratively to achieve your goals.
Summary
In summary, there is never a bad time to set an appointment with a financial planner. Whether you are drowning in debt, through to driving your Porsche during the week and your Bentley on the weekend – a financial planner can help you move from where you are today, more effectively and efficiently to where you want to be tomorrow.
A failure to plan is a plan to fail, however when we are talking about you and your family’s financial security, your retirement, quality of life and yes holiday’s is this something you really want to gamble on?
Financial planning is planning to ensure the rest of your life is comfortable and you can spend it doing what you love, with whom you love and on your terms.