The guide to financial Planning

There’s a saying that goes a little something like this: ‘if you fail to plan, you plan to fail’. We’ve found that this quote rings true throughout all aspects of life. It’s especially true when it’s comes to financial planning. Managing your finances is arguably one of the most important things you can do. It helps to setup a secure future for yourself. However, research shows that 80 percent of Australians do not use or intend to use a financial planner.

Many Australians understand the benefits of using a financial advisor. However, they would prefer to conduct big financial decisions on their own without seeking advice first. Though, since financial advisors are professionals they are the best people to speak to when it comes to making those big financial decisions. So that’s why we’ve put together a comprehensive guide to financial planning. We aim to clear up any reservations people may have about hiring a financial planner, and highlight the benefits that financial planning can bring to your life.

Remember, we aren’t financial advisors ourselves and this blog post is meant to highlight some of the things you could consider looking into. It’s always worth getting the input of a professional before taking any action.

What is financial planning?

It’s worth starting with a good definition of what exactly financial planning is. Financial advice is help you can get from a certified financial planner to assist you with achieving certain financial goals in life. Essentially, financial planning with a financial advisor starts with an evaluation of your current financial situation. Then the financial planner will help you to set up achievable financial goals for your future.

What do financial advisors do?

Show you what you need to do differently
Tell you how much you need to save
Look at which retirement accounts to use
Help you consider whether to finance your mortgage or not
Weigh up the type of insurance you need and how much
Figure out how much you need in your emergency fund
Help you figure out how to achieve your financial goals over a given time frame
Establish whether you should downsize later in life
Look at what level of investment risk you should take

Why is financial planning important?

There are many reasons as to why investing in a financial advisor is a good idea. Financial planning helps you to remain in control of your finances and achieve your future financial goals. Here is a list of the ways in which financial planning is important:

Assess your income

financial planning allows you to look at your income and decide how much you can allocate to spending, saving and to paying off debt. It may also highlight whether it would be a good idea to increase your income level. This might be an incentive to go for that promotion or look around for a higher paying position.

Manage your cash flow

financial planning will help to highlight areas within your spending habits that need improvement. You may find that find that you spend way too much money on something as little as coffee and find that you could otherwise be putting this into a savings account and making a big difference to your overall financial well being.

Decide what investments you want to make

financial planning is also an excellent tool to help you decide what investments to make and increase your overall net financial wellbeing.

Helps to provide your family with security

another incredible benefit of seeing a financial advisor is that they help you to make your sure family is protected by advising you on the best insurance policies to cover your family in case the unexpected was to happen.

Give you a better financial understanding

seeing a financial advisor provides you with general knowledge about finance that you may not have already known. Just having access to this valuable information might help change your whole mindset towards finance and perhaps even make it less intimidating.

Manage your assets and liabilities

one great benefit of financial planning is that it allows you to determine the actual value of your assets and cancel out your liabilities.

Helps you to set up good savings habits

financial planning is another great tool to help you to put your money aside in the form of savings or to make investments.

You give yourself a source to receive ongoing advice

when you receive financial planning advice from an advisor you set yourself up with a source of financial knowledge that you can refer to if you need further advice in the future.

When should I do financial planning?

Financial planning can be done at any stage in your life. Though since there are many different life stages, the financial advice you receive will be different depending on what stage you’re in. Here is a list of the various life stages where you might want to speak to a financial planner:

Between 20 – 39: this is when you are in your young to midlife age. Financial advice at this stage of your life will be advice regarding building up your career, starting a business, getting married, starting a family or buying your first home.

Between 40 – 49: during this life stage, this is when you are looking to achieve a comfortable lifestyle for yourself and want to manage your long-term future.
Between 50 – 65: this is when you will be planning for your retirement. You may be wanting to focus on eliminating debt, protecting your assets and wealth management.
65 and onwards: this is a time when you want to be enjoying yourself, making time for hobbies and going on trips. You might be thinking of aged-care planning or passing on wealth to other family members.

Where can I find a financial advisor?

Once you have made the decision about getting a financial advisor the best places to look is to find a financial planner with the Financial Planning Association (FPA) or the Associate of Financial Advisors (AFA).

Myths about financial planning

The fact that so many Australians do not use a financial planner or have the intention of using one in the future, may be because there are so many myths out there about financial planners. However, we are about to bust those financial planning myths so you can the truth about financial planning once and for all.

It’s just for the wealthy

Many people think that financial planning is only for the wealthy. However, this couldn’t be further from the truth. Anyone at any stage of life, with any income level can get a financial advisor. Your financial goals will be different but it doesn’t mean they aren’t as important.

Advice is general and not specific to the individual

When you speak to a financial advisor an important part of their role is to get to know and understand you. This allows them to tailor advise specific to your needs and your circumstances. They want to help you to create goals that are going to suit you.

It’s risky to trust putting your financial future in someone else’s hands

Many people can be very sceptical when it comes to showing their finances to someone else. However, the financial advisory industry is heavily regulated and advisors must meet a very high industry standard. There are industry rules that advisors must follow.

There’s plenty of time to sort out my finances

For many of us at least at some stage in our lives, retirement seems like it’s forever away. However, important financial decisions come throughout life, and aren’t just when it comes to retiring. It can be when it comes to buying your first home or making a career change. Financial planners can be especially helpful when it comes to navigating through these difficult life choices.

What about financial planning for millennials?

When it comes to financial advice for millennials there are some specific tips for them. This is because they are having to manage their finances during a time when it’s more difficult to find a job, they have high student debts to pay off and may have to face moving back in with their parents because rent is simply unaffordable. So here is some specific advice for millennials when it comes to financial planning.

Save

When you first start earning when you get a real a job it can be tempting to spend your money having fun, but it’s worth developing a good habit of saving at this early stage in your careers.

Pay off debt

you may have a student debt, car loan or perhaps credit card debt. The sooner you get these cleared, the sooner you’ll be able put this money towards saving. Plus, the longer you have debts outstanding the more interest you’ll have to pay.

Avoid new debt

when you land your first job credit will be much more easily available to you. Though it’s important not to get too tempted. You don’t want to get into new debt that will get in the way of any savings goals you may have.

Develop a good credit rating

The importance of your credit rating is not something that is openly taught in school. But the earlier you can start building a good credit profile, the better.

Start saving for retirement

it’s never too early to start saving for retirement. That’s because the earlier you start, the more time your fund will have to grow.

Set up automatic savings

when you schedule for your savings to come out of your account automatically it will help you to build up your savings more quickly to achieve your financial goals.

Build up an emergency fund

as millennial no longer dependent on your parents it’s a good idea to build up an emergency fund to ensure you are prepared for the unexpected.

Develop a plan

finally it’s important to make a plan. When you start making your first financial commitments like buying a house and starting a family, you’ll want to be prepared. That’s why it’s a good idea to develop a plan so you’ll be ready for when those key life moments occur.

Great financial advice websites for financial planning

While there’s no doubt that getting advice from a financial planner will be beneficial in helping you work towards achieving certain financial goals, there are some great website some great pieces of advice for when it comes to financial planning

Millennials Money Man

The is a great website and blog that gives advice targeted towards millennials on finance. It’s perfect for graduates and young professionals who want to start out on the right financial foot.
https://millennialmoneyman.com/blog/

Frugalwoods

This blog is based around the benefits of being frugal, and the idea of early retirement. It is written buy a family whose aim is to live a financially independent life.
http://www.frugalwoods.com/

Blonde on a Budget

Another great blog for millennials. It was started by a young girl who wanted to document her debt repayment journey. In the end, the blog has turned into a financial resource for other millennials. She blogs about a variety of finance topics, as well as her recent adoption of a minimalist lifestyle.

Afford Anything

This an excellent finance blog that serves the purpose of inspiring readers to effectively use their money to pursue their passions.

Final thoughts

To sum up, there’s no denying that planning your finances is good practice. It’s also great to see a financial advisor to do this. They’re the professionals, so they’ll be able to use their knowledge and assess your financial situation to push you in the right direction towards achieving your goals.

There are some myths out there about financial planning, and hopefully we’ve cleared some of those up for you. In addition, there’s no harm in checking out some of the great websites and blog are filled with plenty of useful financial info. So what are you waiting for? Start planning!