I make no excuse for my passion for financial planning. After all, that is my life and it is therefore exactly what I am all about. And, like many others who offer advice on specialist subjects I do wonder just how much of what I discuss in my articles and radio shows ever actually results in appropriate action being taken by my audience. For example, I have always maintained that the starting block for one’s financial plan is to sit down with a qualified financial planner and do a thorough financial analysis every year. I have recommended that you keep an eye on your risk profile and match it with your ever-changing needs, especially when you get close to retirement.
I recommend my own brand of KPIs which can be described as my ‘Key Producers of Income’. These particular KPIs comprise a relatively short list of essential elements in one’s personal financial security formula. They include important action events:
- Estate, tax and retirement planning.
- Savings. Short, medium and long-term.
- Budgeting appropriately.
- Monitoring of financial performance.
- Moving from financially disorganised to financially organised.
None of these elements should be considered to be more or less important than the others. They all have a role to play and they certainly do have bearing on how successful your financial planning will be. Despite our understanding of these things we tend to blame everything around us when outcomes are not what we expected. The trouble is that too often we are actually the sole reason why the outcomes are not what we hoped they would be.
Building your future
Let me illustrate a typical example, using a person who has a family and lives a comfortable life as a result of hard work and dedication. He admits that their risk profiling clearly indicates “conservative.” Accordingly, they have built a safe personal portfolio over the years and it seems to be working well.
Everything looks as if it is on track to attain the specified financial goals. Then one Saturday morning a couple of weeks before their annual holiday the family is strolling around a new car showroom next to the car wash. They take their time looking at the new models and because of the adrenalin rush, those KPIs, which include the personal risk profile, become so hazy that suddenly some ‘indiscreet’ decisions happen to be made. These decisions include using cash saved for the impending holiday as the deposit on one of the new cars, with the readily-available excuse that their credit card will pay for the holiday.
The financial plan will have been disregarded for just long enough to change their financial strategy and so the inherent risk increased. Experience proves that the next thing that happens is that ’buyer’s remorse‘ may set in for a few days, but new influences dictate that a reassessment of their financial situation is called for.
A new plan is urgently required to ensure that long-term financial planning is not jeopardised to the detriment of hard-earned peace of mind.
Moving with your plans
There are many who will be able to identify with the character. Life tends to work that way: most of the time we are disciplined in our approach to how we spend our money and set goals. These goals often include an element of saving — and wisely so. The problem only arises when we upset the balance and allow financial risk to increase disproportionately to our original plan.
Think about your own situation. How much risk are you exposed to at present. Are your investments in property and equity markets? The solution may simply be regular monitoring, but it may also require a specialist to clearly identify the needs and add value by structuring a real solution. My advice to you is whatever you do, do not ignore your KPIs, manage them.