“One is sitting in the shade today because a tree was planted several years ago.” Buffett (Warren)
My underlying presumption as a financial life planner is that planning is a “positive” thing. The value of preparation is commonly accepted as a prerequisite for business success. In the personal environment, however, Benjamin Franklin’s advice that “by failing to prepare, you are planning to fail” often falls on deaf ears.
This is usually because people believe they don’t have the time or expertise for personal financial planning, and they also don’t want to spend money on hiring a licenced financial planner, in my experience. Personal financial planning is considered pointless, even spineless, by a few people I’ve met who are so confident in their ability to make and keep substantial fortunes.
So, the aim of this article is to explain why financial life planning is crucial. I’ll discuss some of the latest planning methods, demonstrate how to prepare in reality, and discuss the outcomes. Click here to find more about E.A. Buck Financial Services
Is it easier to plan or not to plan?
Planning is something I am passionate about because it leads to results. Cold calling to set up meetings to sell insurance was my first sales job in financial services. My boss was fantastic, and she helped me organise my target market, pitch, call strategy, and everything else. My first call was right on, and I was able to arrange an appointment within minutes. My boss knew it was going to work, and my coworkers knew it was going to work. That is exactly what happened.
So, why should we budget and schedule our lives? For four factors, in my opinion:
1. To create a workable system for handling household finances.
2. To accomplish long-term objectives as quickly as possible
3. To ensure financial stability in the long run
4. To cope with losses in life
Let’s take a look at each one separately.
1. The budgetary system
Many citizens still do not have access to a financial system or framework. We often enter a fantasy world when it comes to expenditures, which are at the centre of financial planning. Even if a family can have a fairly detailed collection of current financial statements (assets, liabilities, revenue, expenditure, and estate), they are rarely able to project how those statements would look ten, or even five, years from now.
Clients normally come to financial planners for the following reasons, according to financial planners:
‘We don’t have full financial power.’
I don’t understand money; all I feel when I’m around it is anxiety and fear.’
‘We have no idea where we are now or where we will be in the future.’ ‘We don’t seem to be able to pursue the lifestyle we want.’
Even if the image does not look fine, when families gain clarity, it typically brings a lot of relief. At the very least, they are aware of their role and can take reasonable action.
Unfortunately, we live in an age where wealth is mostly built for its own sake rather than as a way to live a happier life. Money becomes a metaphor for the ego, and financial choices are often taken to defend or massage our egos rather than to help the achievement of our deepest life goals.
Money and life are inextricably related. It is vital to develop specific life goals in order to provide guidance and to make sound financial decisions. So, whenever I’m asked for feedback on a potential investment, I always ask, “Will investing in this product allow you to achieve your goals more quickly and efficiently?” Frequently, the response is that it won’t.
3. Long-term security
Increased survival has a huge financial effect on families. The Three Factors of Financial Freedom: savings, compound interest, and asset allocation are the keys to solving this. Although saving means cutting back on expenditure and likely jeopardising essential and immediate life objectives, financial life planning may assist in resolving these challenging short-term-long-term conflicts.
4. Coping with Unpredictable Situations
Life has already kicked you in the teeth and will continue to do so in the future. Accept it and make plans for it. From an annoyance but not too drastic car breakdown to the death of a near family member, life will give us a wide variety of curveballs. Create contingency plans that include a Security Fund and insurance. Insurance is something that no one enjoys (though I have yet to meet a widow who complained her husband was over insured).