If you’ve made any new year resolutions for 2020, then the odds of you sticking to them are seriously stacked against you. Research shows almost 80 precent of new year resolutions fail by the second week of February1. New year resolutions generally fall into three areas, health, relationships or money, things we all struggle to get right consistently.
“80 precent of new year resolutions fail by the second week of February.”
When it comes to money, a financial plan may not be at the top of your 2020 resolution list. However, it just might help you tick off some of your big-ticket items. Whether it be to get married, start a family, buy a home, or in fact retire, being financially fit will reduce the financial stress of achieving these significant life events.
Much like seeing a personal trainer to get physically fit, seeing a financial planner will help you get financially fit not just for 2020 but for the rest of your life. If you are not exactly sure what a financial plan is or what a financial planner does, then you have come to the right place.
A financial plan demystified
A financial plan:
- IS NOT a get rich quick scheme
- IS NOT just for old or retired people
- IS NOT just for people with lots of money
- IS NOT a one-off, set and forget activity
Instead, a financial plan actually is:
- A customised guide to achieve your life-long goals
- To ensure you have enough money now and, in the future
- To provide security, peace of mind and financial independence no matter what life throws at you
- To be adjusted as your priorities change
How a financial plan works
A financial plan is a comprehensive and specific guide customised for you. It is professionally prepared by a Certified Financial Planner covering all aspects of your current financial situation. It outlines an individualised approach with specific details to get you from where you are today to where you want to be financially in the future.
Some key aspects of the financial planning process include:
- Setting your goals – both your short and long-term goals that you are willing to put ahead of everything else. Goals should designed to be specific, measurable, achievable, realistic and time bound. For example, “I wish to pay off my home loan in 5 years by paying an extra $800 per month on top of the minimum repayment”.
- Assessing your appetite for risk – this can be calculated depending on a number of personal factors such as age, family status and your general attitude to risk. It will help determine how any investments should be structured.
- Listing your assets and liabilities – accounting for your income, savings, investments, property, or any shares held along with home loans, personal loans or credit card debts. This will provide an overall position of your current financial situation and help prioritise strategies such as paying off debts or setting up savings.
- Superannuation – to ensure you are maximising the benefits of superannuation by reducing tax and administration fees while getting an investment strategy aligned to your personal situation and how your superannuation income will work when you retire.
- Insurance – putting a plan together of how to protect your assets, including your ability to earn an income and provide you with options should the worst happen. It also makes sure you are not over insured or have two policies covering the same thing.
- Review periods – A regular review period should be stated so you can keep on top of your progress and if needed, re-adjust your priorities.
The role of a Financial Planner or Adviser
A financial planner/adviser should be someone you can trust and also communicate with easily. They should be able to explain everything in a way you understand. They should clearly explain where you are today and what needs to happen to get you to where you want to be in the future. They should recommend the right mix of financial products and administer these products on your behalf and conduct regular reviews with you.
Financial Planners should also be clear on how they are paid, either from a financial planning fee, commissions or a mixture of both. They must also legally operate under an Australian Financial Services Licence (AFSL) and be authorised to provide advice on the financial products they recommend to you.
Helping you achieve your personal financial goals
While most new year resolutions will struggle to survive, by having a robust financial plan in place you can be more confident of achieving your personal goals in life without the financial limitations or stress that can often put them out of reach.
Saige Accountants and Financial Planners provide financial advice on the Central Coast. Our expert advice team, led by Certified Financial Planner Brett Call, goes above and beyond every day to ensure you have a robust financial plan that it is regularly reviewed as your circumstances change. We are proud to have many long-standing customers who we have truly got to know over the years and have developed highly trusted relationships. Talk to us about your 2020 financial aspirations.