Why is Financial Planning necessary?
Our experience tells us that those who plan to achieve financial security are far more likely to achieve it. It is often said that when you don’t know where you are going, any road will do! Pushing forwards with no clear strategy will result in a handful of unrelated financial products and the chances of achieving a satisfactory outcome are substantially reduced.
We often come across people who have reduced their chances of achieving their financial goals for one or more of the following reasons:
Planning to fail by failing to plan
People need encouragement and guidance if they are to plan well. Many are capable of planning but simply fail to do it.
Failing to check on progress
Some get as far as making some form of plan but fail to keep track of whether or not it is going to result in the right outcome. Monitoring progress is essential but not always easy to do.
Other obstacles to achieving Financial Independence
- No goals – Aim at nothing and you’ll probably hit it! The failure to define clear financial objectives ensures that any plan lacks focus.
- Inflation – Even in times of relatively low inflation the impact of this factor alone can be devastating in reducing the purchasing power of future income or capital.
- Risk – A failure to understand the relationship between investment risk and reward can lead to inappropriate product selection and a far different outcome to expectation. Failing to address the financial implications of long term illness ordisability or a premature death can lead to disaster.
- Tax – Financial outcomes can be dramatically affected by tax and many fail to understand or legally exploit the opportunities for effective tax planning.
- Putting things off – procrastination – Without doubt this is the most common reason why people fail to achieve successful financial outcomes. The cost of delay can be huge since with shorter time frames it becomes more difficult to achieve the desired outcome. Many start off with the best of intentions but for some, or all of the reasons stated, fail to make the necessary progress towards achieving their financial goals. They may well, at a later date, have cause to reflect on a lost opportunity. Similarly, those who procrastinate and leave their financial planning later than they should, leave themselves with a much steeper hill to climb. This can result in the need for increased outlay or greater risk than would otherwise be the case.
We want you to have the best possible chance of achieving financial security in the short term and financial independence in the longer term. Let us show you how we can work together to achieve this.
Lets look at the The Financial planning cycle…..