Financial planning is the process during which you sit down with an Accountant and discuss how financially secure you would like to be in the future, and then devise a plan to help you get there. I see this as one of the most liberating decisions we can take as a person and business owner.
If you are an athlete, business professional, parent, or leader in any area of your life, you have no doubt seen the benefit of making a plan for how you hope to get from A to B before. Goal setting is a hugely beneficial tool to us all, whether we want to lose weight, quit smoking, learn to play the guitar or ensure that you are financially secure into your future, setting good goals can help us achieve it. Without this key part of the puzzle, we don’t know where we’re headed and will never be able to identify when we’ve ‘made it’.
Some things you might like to consider in advance of meeting with an Accountant to set out your financial plan, are:
- Are there big items you would like to be able to afford in future? What are they? (These might include buying a home, setting up a dream business, paying for your children’s education, paying for a wedding, retiring abroad, remodelling your home, etc.)
- When will these items need to be paid for?
- Do you want to continue to work as you currently do in the long-term?
- What does retirement look like to you?
- Do you have any philanthropic goals you would like to strive for going forward?
- What is your spending pattern like right now? Are you happy with it, or are there areas on which you would like to improve?
In relation to the last question, it is simply your opportunity to see where you are doing well in terms of managing your money and where there is room for improvement. We all have our strong suits, but nobody is perfect. Some people are great savers, others make smart buying decisions, while still others are great at knowing where their money is going and can account for every cent.
You can choose to build upon your good habits and minimise the ones that aren’t serving you. Remember, positive action that you start today will compound over time into amazing results.
Focus on Areas You Can Control
We cannot control everything in life. Although sometimes we think it might be nice, in reality, it wouldn’t serve us. As it is, we can decide how to deal with the question of control.
There are areas which we have significant control over, these are our own actions and how we view the world. Here we can choose to implement good habits which serve us well. We have some control over our health, our career and earning power and can do our best to swing the odds in our favour through our actions. However, there are elements which we cannot control, these include the weather, the political situation in our country, the world economy, interest rates, etc.
Many people spend more time worrying about the elements they have no control over, losing sleep at night as a result and ignoring those factors which we can control. No, you cannot know how an investment will perform in the long-term, you don’t know if the interest rate on your mortgage is going to increase and make things a little tough for yourself and your family down the road either. However, you can control how you view these challenges, how you react to them, and what habits you put in place today to best maximise the reach of your income now and in the future.
Take responsibility for what you can control and do your best to let the rest go. It is wasted energy.
Get Ready to Embrace Change
When you sit down with your Accountant to discuss your financial plan, this will take into account where you are now, financially speaking, and where you want to go. Unfortunately, none of us have a crystal ball and so we use projections and informed assumptions about what is likely to happen in the future to help us plan.
For example, if you have a young child now, it is reasonable to assume that they may want to go to college in the future. If you have a car now, it is reasonable to assume that it will need to be changed in a number of years. We can assume a range of things about what may or may not happen in the future. This gives us a template upon which to build your financial plan.
That said, when you start with projections, assumptions and educated guesses, you must accept and understand that as life unfolds, things may not turn out exactly as you thought they would. For this reason, a solid financial plan is flexible to allow for any unexpected diversions that may arise down the road. Your plan can be tweaked, and we can course correct, but it makes the process easier when you understand that this a necessary part of the process.
Engage for the Long-Haul
Life isn’t straightforward, but a good financial plan can be. It can help you to see the road ahead and to know what your next steps will be. A good financial plan evaluates the best products to help you achieve your goals and is flexible so that when there’s an unexpected bump in the road, it doesn’t throw you off course, but allows you to pick up and carry on with your end goal in sight. When you decide that you want to take control of your financial future, understand that it’s not something you will do now and forget about. Financial planning is a process and your plan should be reviewed once a year to ensure that it still makes sense for you and your lifestyle.
The great thing about financial planning is that there is no better time to start than today – no matter what age you are! As I said earlier, the positive habits that you lay out for yourself today will only deliver greater results for you as get older. Don’t leave your financial future to chance, it’s far too important.
If you would like more information, please email me at: Info@MKConsultancy.ie