Despite popular belief, it is not because we love paperwork! It is because it helps you reflect on your life and your aspirations. The process of writing down goals establishes commitment and forces you to call into question your values.
A great financial plan puts the control into your hands meaning you can make better decisions about your financial future.
But what are the consequences of not having a financial plan?
1. Missing out on your goals
By not spending time reflecting on your current situation and what you want to achieve in the future, you are likely to miss out on some of your goals. Planning early gives you more flexibility when life throws complications your way.
The very act of planning and committing to goals increases your likelihood of achieving them. Success coaches recommend sharing your goals with at least three people because you are less likely to park your ambitions are more likely to realise them.
2. Not being able to provide for your family
We all want to be able to provide for our nearest and dearest. We often invest believing that we are doing our best to provide for them in the future. But, despite our best intentions, we might not be doing the best thing for them.
The world of tax and inheritance is increasingly complex, and the ‘right’ solution for many might not be suitable for you and your family. This is why documenting the most important thing for you and them, be it education, housing or revenue will help you choose the right path.
3. Working for longer than you need to
You probably have a retirement number in mind, but could you be in the position to knock a few years off it and still live comfortably? We often encounter clients who believe they are ‘on track’ only to find that they could potentially retire sooner than expected. Their investment strategy just doesn’t marry with their life goals. The only way to understand where you are against your road map is to sit down and plan it out.
4. Getting generic advice about products rather than solutions
You might decide that an offshore bank account is the best way to protect your savings and provide for your family in the future; this may well be the case, but how did you reach this conclusion?
Was it by searching for the benefits of offshore banking and deciding that you liked the sound of them? Or was it by planning out which elements of your lifestyle are important to you and searching for the solutions to provide it?
While the result may be the same for some, it is not true for everyone. You need to start with you and what you want and then search for the product or solution that provides it.
5. Having an investment strategy that isn’t fit for purpose
A written financial plan is a living document; it’s not goals you set when you are twenty and keep in a drawer until you retire. We all change over time.
Our situations evolve, and so do our priorities. If you are not reviewing your lifestyle and priorities and adjusting your financial planning in relation to this, there is a risk that your lifestyle and income will no longer be aligned.
A good documented financial plan will help you to understand your current financial position and if you are in line to achieve your goals. While a plan put the odds in your favour, you will have to be the driving force in its implementation. This might mean you need to commit to a regular savings plan, transferring your pension or finally writing that will. It could be as simple as reducing the risk profile of your investments as you reach retirement age to secure your lifestyle.
