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5 Reasons You Need a Financial Plan

5 Reasons You Need a Financial Plan

My partner Mel says her biggest surprise when she learned about what I do day to day was not that I spend time working with people that have a lot of money to manage, but that I also spend a lot of time helping younger and less wealthy people to get on the right track…… you have to start somewhere, right?

One of the ways we help is by preparing a Financial Plan (now called a Statement of Advice). How can this help? Well, people with a financial plan are more confident with their money and live more comfortably, irrespective of their income level, according to the 2012 Household Financial Planning Survey commissioned by our US counterparts, the Certified Financial Planner Board of Standards.

Here are 5 reasons why you need a Financial Plan:

1. It will create a platform for your future growth
We define a comprehensive Financial Plan as one that covers budgeting and cash flow, savings and investment, debt reduction and major purchases, consideration of taxation issues, retirement and superannuation and when things don’t go to plan, personal insurance and Estate Planning.

Having all of these areas of your life organised and working in unison towards an outcome provides excellent focus not to mention that “it’s taken care of” feeling of relief.

Most of us have investments (eg superannuation) and will be investors for life, most of us have some type of cover if we get crook or die, most of us have savings started for things we want for our future (eg own a home, new car or holiday). Doesn’t it make sense to try and understand whether these will produce the outcome we want or need for ourselves?

Those that plan for the things they want (or protecting them from the things they don’t want) are much more likely to get the result they are after.

2 Specific and measurable goals lead to smart decisions
A Financial Plan is a lot about getting from “A” to “B,” so the process of creating your plan will involve thinking about what “B” looks like for you – ie your goals (or as I like to call them, signposts of your success)!

Some goals can be framed in general terms eg I would like to pay less tax. Others can be more specific eg I would like to have enough to pay cash for a new car costing $25,000 in 4 years.

Specific and measurable goals can be easier to work with as it can be a simple matter of testing whether they are realistically attainable and over what timeframe. The flow on is that this planning can lead to a co-ordinated approach and buy-in from both members of a couple, smarter budgeting and then perhaps consideration of different investment types that can help you pass your signpost earlier.

3. “The faintest of ink is better than the most powerful memory”
This Chinese proverb has many applications, but in this context I refer to our tendency to forget or lose touch with the reasons we originally started doing things.

Writing down your Plan and your goals and then regularly reviewing them act as a reminder of what it is you are trying to achieve and helps you keep focussed.

It also allows you to adjust the plan for any potholes that appear along the way or to make major changes if you realise that you are no longer connected to the original goal. Significant changes can then be made in the context of how this affects all the elements of your financial plan.

4. You will be more confident with your money
According to the 2012 Household Financial Planning Survey, 22% more people feel “very confident” about managing their money, savings and investments simply because they have a financial plan.

The good news is that the Plan does not necessarily need to have had professional involvement to inspire confidence. Like a sports coach however, a qualified and experienced financial coach can find the shortcuts to save time and provide the expertise to inspire and support their team to greatness!

5. You will be wealthier and live more comfortably
According to the CFP Board survey, those that have a financial plan are significantly more likely class their lifestyle as “living comfortably” (48% vs 22%).

In an earlier “blog” (tinyurl.com/kmbdcvy) I suggested that wealth was not necessarily related to your level of income. This seems to be further backed by the CFP Board Survey as more people in the $50,000 to $99,999 income bracket rated their lifestyle as “living comfortably” then those without a plan in the higher income bracket.

The survey also shows that those on lower income levels with a financial plan are significantly more likely to repay their credit cards by the end of the month, and those on higher incomes with a financial plan are significantly more likely to have accumulated at least $100,000 in investments.

It is clear, those with a plan are more likely to achieve financially.

If you would like help developing your financial plan feel free to contact us.





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The Trustee for Pereira Family Trust (ABN 25 467 180 446), trading as Lake Macquarie Financial Planning is an authorised 

representative of Charter Financial Planning Limited, Australian Financial Services Licensee.

This website contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. 

You need to consider you financial situation and needs before making any decisions based on this information.