Finance

WHAT IS FINANCIAL PLANNING?

Andrew Fort B.A. (Econ.) CFPcm Chartered MCSI APFS, Certified and Chartered Financial Planner, Fort Financial Planning

One definition provided by the Chartered Institute for Securities & Investments (the financial body for Certified Financial Planners) is, ‘Financial planning is a professional service for individuals, their families, and businesses, who need objective assistance in organising their financial affairs to achieve their financial and lifestyle objectives more readily’. It’s a six-step process: 1. Identify your goals in life – short, medium and long-term. 2. Work out what assets and liabilities you have – write them down. 3. Evaluate your current financial position – how close are you to achieving your goals? 4. Build a plan – create a route map for achieving your different goals. 5. Implement your plan – make the changes that are needed. 6. Monitor and review your plan at least yearly and make adjustments when needed.

That’s the technical definition out of the way. It seems rather dry, doesn’t it? In truth, real financial planning is about providing answers to many of the most troubling questions; Will I be okay? Will I run out of money at any point? Can I afford to help my children financially while I am alive? Can you help me become financially well organised? Can you give me peace of mind regarding my investment decisions? What do I need to do to retire comfortably? Will my wife/husband/partner be secure in the event of my death? What if I need long-term care? How do we stop worrying and live our lives to the full? Will we have enough money to do the things we want to do? How can we get organised and not worry that there are things we should be doing, but aren’t?

‘The hardest thing about getting started, is getting started.’ How many of us have short, medium and long-term goals? Nobel prize-winner, Daniel Kahneman, demonstrated that most people are very good at making quick decisions that affect their lives in the short term at the expense of medium and long-term decisions. After all, it’s easier to buy a new car than to save money for the distant future. Goal setting really is the most important stage of financial planning. It can also be simpler sometimes than we imagine. A common goal, not always clearly expressed, is to become financially independent from working at a certain age. Goal setting is similar to the picture on the front of the jigsaw puzzle. You need to understand what you’re looking at before putting the right pieces in place. A good financial planner, one who is experienced in asking questions and providing coaching, can be instrumental in this regard.

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