Can you believe it? Another year gone.
How was 2013 for you financially? Are you financially where you planned to be, a year ago?
And did you plan, a year ago?
Managing finances in the modern world can sometimes seem a little like a maze. The good news is there’s definitely a way through it. And it starts with taking control of your finances.
To do that, you need to make a plan to achieve your financial goals, and planning starts with decision making.
As you look ahead to 2014, and imagine where you will be financially, a year from now, here are five decisions we recommend that every person should make, on the path towards mastering the financial planning process.
Admit to, then correct, past financial mistakes
No one is perfect. We have all made financial mistakes. The key is, do we keep making them, or do we take stock and decide to make changes to avoid the same mistakes again. Mistakes like buying a home we cannot afford, abusing credit, taking loans at higher lending rates that is necessary, ignoring the fine print and buying insurance products that don’t protect what matters most, having too many insurance policies, or making rash investment decisions based on emotion rather than on logic and available data.
It is important that we learn to accept our past financial mistakes and commit ourselves to correcting these mistakes.
Take a holistic ‘total picture’ approach to your financial life
Financial decisions should never be made in isolation. The big picture needs to be assessed because isolated, myopic financial decisions often have considerable flow-on impact on other aspects of our financial life.
In the case of tax planning, for example, if every investment decision is made with the sole motive of saving tax, it negatively affects the return on the investments.
Similarly, every investment when being liquidated should be assessed before the sale to know the tax implications. “Act in haste, repent at your leisure,” as the old saying goes.
That’s why we do what we do, in being tax advisers and financial planners. This holistic approach towards financial management maximises the benefits of your financial planning.
Keeping it real. Prioritise your goals.
I once heard a comedian say, “You can’t have it all. Where would you keep it?”!
Whilst we’d all love a magic wand to put our financial life instantly in order, and be able to have every one of our dreams become a reality overnight, that’s not going to happen. Is it?
Many of your dreams will be achieved. But not all of them. Accepting that reality helps you focus on making sure you prioritise the goals you want to achieve. This sometimes involves letting go of some dreams. On the flipside, it greatly increases the odds of achieving some of your dreams. So keep it real and prioritise what really matters for you. Focus. Don’t scatter gun your financial life.
Invest in credible advice
There’s a tendency for many people to rely on real estate agents, friends or family for informal ‘financial advice’ and opinions. The internet has also emerged as a source for financial information.
Note the word, ‘information’. It’s only advice when an experienced adviser who is aware of your total situation and life context, can assess the information and make recommendations that make sense for where you and your family are now, and what your goals and preferences are.
It’s a false economy to rely on free or cheap advice. Always assess the credibility of the source before taking financial advice. Consider the flow-on and long-term effects of bad advice. Your future well-being is at stake. So be sure to choose your advisor wisely and don’t be afraid to invest in professional advice so that you always make well informed financial decisions. Don’t “Ready. Fire. Aim.” it. Aim first.
Take action. Implement your Financial Plan
Getting a financial plan and recommendations on financial products through expert advice is a job half done, until it is put into action. Many people tend to postpone the implementation a financial plan. Life can get in the way. Yet time waits for none of us.
The success of a well planned financial road map depends on how soon we start walking on it. Starting today, even with baby steps, is the most critical success factor for your financially secured future.
As Lao Tzu said, “A journey of a thousand miles begins with a single step.”
And no-one can take that step for you. It’s up to you.
Decide to take that step.
Once you’ve made these decisions and put them into action, then it’s a matter of managing and monitoring your plan at regular intervals. The financial situation of every individual is dynamic in nature. Our goals and priorities change from time to time. Sometimes someone moves your cheese!
Our personal life situations always impact on our financial life. Be sure to review your financial plan periodically to ensure it is in tune with the current events in your life.
That will keep you on course to meet your long term goals and to find your cheese.