Key Points:

  • Financial Planning is for those starting out as well as more seasoned / wealthy investors.
  • A financial plan answers real questions to help you make better day-to-day decisions and reach financial goals and it doesn’t have to be expensive or complicated.
  • The seven questions outlined below, demonstrate how a Financial Plan can be effective for your finances and your life.

So even though you may believe that Financial Planning is not important, or you don’t have enough money to need a Financial Plan, or it may cost too much, it is likely that you are putting the emphasis on “Financial” when the emphasis should be on “Planning.”

Having a Financial Plan simply means knowing where you want to go and figuring out how best to harness your resources to get there. Financial Planning isn’t just about money, it’s about your aspirations, the goals and priorities you have for you and your family and how best to protect yourself both now and in the future.

Real questions for real people

I cannot emphasise enough that a Financial Plan isn’t something esoteric or only for more seasoned / wealthy investors and it doesn’t have to be complicated, take a lot of time or be expensive.

At its essence, a Financial Plan answers real questions for real people whatever their stage of life or how much money they have. To pique your interest and get you thinking differently, here are seven questions a Financial Plan can help you answer and why they are relevant for everyone.

1) How realistic is it to reach all my dreams and goals?

You may have a general idea of what you want to accomplish, e.g., buy a home, send your kids to college, pay down debt, take annual holidays, retire early, or have a properly structured and tax efficient Estate Plan. The only way to make any of that happen is to get specific and a Financial Plan starts with helping you zero in on what you own and what you owe and helps clarify how your income can cover essentials and discretionary expenses as well as also paying down debts and putting savings aside. It will help you focus on your goals, put a Euro amount on each of them and create a realistic timeline for achieving them.

2) What should I do first?

Trying to save, invest and pay off debt all at once can be overwhelming and a basic plan helps you prioritise, whether you’re creating a savings strategy, trying to reduce debt, or both. It can give you a blueprint for taking action; for example, getting a pension set up, paying off high-interest debt and then setting aside money for college education and family holidays.

3) How should I invest for retirement as well as shorter-term goals like a down payment or college education?

How you invest has a lot to do with when you will need the money and generally, the longer the timeframe the more risk you can afford to take. If access is needed within the next six-to-eighteen months, like an emergency or holiday fund then Cash is King. Money for medium term goals, i.e., in two-to-four years, like a home down payment might be conservatively invested in a longer-term savings accounts or bonds. Saving for longer-term goals more than five-to-seven years out, e.g., college or retirement, could be invested in shares. Once you have answered questions one and two above, you will easily be able to pinpoint how to invest for your various goals.

4) What’s the best way to protect my family and myself?

A Financial Plan can also help you focus on crucial issues like emergency preparation and insurance. Do you have enough accessible savings to cover at least three-to-six month’s essential living expenses? When was the last time you reviewed your Health Insurance cover? Do you need Life, Serious Illness, or Income Protection Insurance and how much? These are the deeper questions a plan can help you answer so that you can protect your family from the unexpected.

 5) When will I be able to retire and how much will I need?

As you prioritise your savings goals, retirement should be high on your list, because the earlier you start planning the better. But planning for when you’ll be able to retire isn’t about saving blindly; it’s about projecting your needs with some degree of accuracy which is why current household expenditure provides a reasonable starting point to estimate a retirement budget. This will give you an idea of how much you need to save, when you can realistically retire, and if you’re on track.

6) What if something should happen to me?

This is the key reason for Protection and Estate Planning which are areas that many people feel doesn’t apply to them. But we all need to think about who will take care of a surviving spouse, partner and children, who will make financial and medical decisions if we can’t do it for ourselves and how we want our assets and personal property distributed. Again, it is not about “how much,” but rather about “how” we want these decisions to be made. A Financial Plan helps keep you in charge and avoids someone else making key decisions for you.

7) What am I overlooking? 

There are a lot of pieces to our financial lives and sometimes it’s hard to see them all let alone how they fit together. A Financial Plan lays them out for you so you can see if something is missing and getting the assistance of a Financial Planning professional provides an objective voice and a set of trained eyes to help you address your key questions.

Answers that go beyond money

The process of creating a Financial Plan can be just as important as the plan itself. It can help you think through and more confidently make life decisions, give you the assurance that your family is covered in the face of an uncertain world and help couples be on the same page as they deal with current concerns and future hopes.

How we help

We can help take the effort out of this for you by demonstrating how this would work for you and your family and providing you with one cohesive Financial Plan.

You can arrange a meeting by clicking here to access my diary, email or alternatively, call me on 087 8144 104.

Source: The Schwab Centre for Financial Research which is a division of Charles Schwab & Co., Inc.