Following a plan will help you improve your financial situation. The process is as follows:
Identify Goals
Setting goals is a vital step in the process of financial well-being. After all, how can you get somewhere if you don’t know where you want to be?
You should identify your short, medium and long-term goals. Assuming that you want to continue to live well in retirement not only do you need to plan the achievement of your pre-retirement goals but also the lifestyle you would like to lead when retired. Financial resources are limited. Spend now and you may not have the money to enjoy in the future. Save now and you may need to defer your enjoyment. It is a balance and you need to weigh up the various factors that affect your life and determine how you want to live over your entire lifetime.
Assess Your Current Situation
Your existing financial situation is a starting point for the achievement of your goals. You will need to assess your:
- Assets and liabilities;
- Income and spending;
- Asset protection (insurance);
- Taxation;
- Your investor profile (how you feel about investment value volatility);
In this process you are trying to determine:
- How much can be saved for the future;
- How can assets, and liabilities, be better utilised to achieve goals;
- How can your affairs be restructured to improve your tax position and the risks that we all inevitable face in living and investing;
- How effective are your existing investments and can they be improved.
Prepare your plan
Once you have set your short, medium and long term goals and assessed your situation you can make your plans. Goals can be achieved through:
- Saving;
- Investment returns (income achieved and capital growth);
- Taxation efficiency (taxation savings);
- Reduction in risk through strategies such as investment diversification, insurance of your assets, particularly your life and income earning capability;
- Estate planning: what do you want to have happen when you die? Who do you want to manage your affairs if you become incapable of doing so.
You plan will involve all of the above.
Plan implementation
When your plan to meet your goals has been formulation it will be implemented. All of the steps necessary to put your plan into action must be enacted.
Monitor performance and review
Things don’t always go to plan for various reasons. Therefore, this step in your plan will take into account and react to:
- Change of goals;
- Change in circumstances;
- Change in economics and investment returns.
Following the above planning process will help you achieve a better financial outcome. A financial planner or investment adviser can help.