Having a financial plan is the most important step you can take towards achieving a financially independent future for yourself and your loved ones. While this may seem very obvious, we are constantly amazed at how few people have any kind of financial plan. This short article is only a brief introduction and is not intended to be a comprehensive primer on financial planning in any way. However, we do hope to inspire both those who, due to pressures of work and time, do not have a formal financial plan, to create one now and those that do have an old plan, to look at it again to ensure that it is still fit for purpose.
You are, probably, in an important job, managing staff, running a department or the whole company. Whatever your professional role, it is unthinkable that you would run your business without any kind of plan. An organization without a plan just drifts along, day to day, and would be, undoubtedly, soon left behind by the competition. The same applies to your personal financial planning. Despite the time, money and effort we all apply to planning our business lives, few of us give our personal financial future the same consideration. Setting aside some time to concentrate on your own finances, and with help from a qualified professional consultant, you can produce a plan that will lead to not only the prospect of a better financial future but also give the peace of mind that comes from knowing your affairs are in as good an order as your business.
A plan should be very personal and suited to your particular mix of circumstances. It must also be flexible enough so that you may adapt and amend it from time to time as your life path twists and turns. Unless you are used to 50 or 100-year Company planning, (we know some of you are), this personal financial plan will be new in terms of the length of time it aims to cover: your life span.
You will need to start by giving yourself some broad-brush assumptions about your future. Which, depending on where you are along life’s journey, might include such things as:
- Likely career trajectory
- Future property ownership
- Marriage
- Children and their education costs until they graduate
- Retirement age
- A pension: its timing and the quality of life you want it to sustain
This will lead to some objective setting, with approximate dates, that set the scene, timings and financial imperatives of your plan.
You will undoubtedly already have a good understanding of your current financial situation. Still, as part of this comprehensive planning process, it is probably wise to make a formal statement of yours, and if appropriate your partner’s, current financial situation in detail. This would include:
- Net income (not only salary but also property rental income, dividends, etc.)
- Total outgoings (you don’t need to list every small detail, but certainly the large expenses)
- Existing savings/investments (include all kinds of savings, whether in shares, bonds or bank accounts)
- Any pension funds (existing and previous)
- Property owned (note where there are any outstanding mortgages)
- Any other valuable items such as very expensive jewellery or perhaps that vintage Ferrari?
- Any debts (excluding mortgages already listed above)
With your assumptions, objectives and these facts to hand, you are able to consider the financial strategies of how best to achieve your plan.
It is here that most of our clients turn to us for expert advice. There will be a gap between your current financial status and the future you have mapped out. This gap will be filled by the financial and investment plans.
To help complete this vital part of the eventual plan you, and your consultant will need to consider some financial variables such as:
- What are your income targets, and how will these be achieved? (A promotion, ask for a pay increase, take a second job or start a business if you don’t have one already?)
- How much am I willing to save each month and how much do I need to save each month?
- If you can’t reach your targets with savings (most people can’t), what investment returns will you need to achieve those targets?
- This naturally leads on to thinking about which investments to make to help you reach the target returns?
By now, you will have a reasonable idea of the kind of things you need to consider for your investment plan. It can look straight forward, but if it’s going to be done thoroughly, it’s not always easy to get through to the end of the planning process. Many will become distracted or find it a struggle to do well. Those that do complete their financial plan usually get some help. They find that an independent view, from a financial consultant, who applies some discipline to the process, will lead them to a much better document.
Just share with us your hopes and dreams for your future, and one of our highly qualified financial consultants will bring their considerable expertise and wealth of experience to ensure that your personal financial plan is robust and capable as a working document to help guide you towards that successful financial future.
We would certainly be delighted to help you, with no obligation or cost.
Get in touch today, by email or telephone.
