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September 09, 2020

How financial planners help you obtain financial security

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Katerina Sousalis
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A life of financial security gives you peace of mind that you and your family are protected. But can a financial planner show you how to get there.

When Jessica landed her first role as an advertising intern, a life of financial security didn’t seem to be on the cards. That role barely paid minimum wage. However, it also offered the potential for massive increases over time, as long as she put the work in.

Very early in her career, Jessica recognised the importance of having a financial plan. And as she worked her way up the ladder, she kept developing that plan so she could create the life she wanted.

As she puts it:

“To meet my savings goal, I set a very detailed budget, with limits for everything from groceries to entertainment. I also follow the 24-hour rule when shopping – I wait to see if I’m still thinking about an item the next day before making a purchase.”

The result?

At age 27, Jessica has $30,000 in her savings account. And, now, she’s look at how to invest those savings so they can start earning money for her.  She’s well on her way to financial security, thanks to her plan. But if she’d started a little before hitting the $30,000 mark, she could be even further along.

Could working with a financial planner help you do something similar?

Before we get to that, it’s important to answer a key question…

What is a Financial Plan?

A financial plan is a document created to help you manage your money. Typically, it involves setting out current and long-term financial goals for yourself. It also documents the actions you plan to take to reach those goals.

For example, Jessica’s long-term goal was to have $100,000 in savings. Actions such as limiting her spending on entertainment helped her to move towards that goal.

You can create a plan on your own, or with the help of a financial planner. Either way, the key is to develop an understanding of where you are now so you can start working towards your future.

How Can a Financial Planner Help Me Create Lifestyle Choices?

Your ultimate goal is likely to create financial security. Of course, this is a fairly loose term that means different things to different people. For some, early repayment of a mortgage means financial security. For others, having enough money saved for an amazing retirement is the real goal.

Whatever your definition may be, a financial planner may be able to help you create that lifestyle.

Your planner can help you to do all of the following:

  • Define financial goals and a strategy to achieve them;
  • Create an investment plan based on your current position and what you hope to achieve.
  • Minimise tax using appropriate strategies.
  • Create a budget that will help you lead the lifestyle you want, without overspending.
  • Plan for your retirement.
  • Protect any assets that you hold.
  • Make full use of your superannuation.

But beyond the money, a good financial planner can help you create confidence. That’s the conclusion of a survey that IOOF, a financial advisory firm, conducted. They spoke to 521 individuals about the effects that financial planning had on their lives.

The survey found that those who had a financial plan experienced a 21% increase in peace of mind. They were also 19% less likely to have arguments with their families and friends.

So, a financial planner may be able to help you create the financial security you’re looking for. And it’s also possible that they can help you improve your overall happiness.

What Might my Financial Plan include?

The answer to this question depends on the specific purpose of your financial plan. It needs to address your personal definition of financial security. That’s why it’s important to work with a planner who understands your needs.

A typical financial plan may include the following:

  • Documented financial goals
  • Strategy to achieve those goals
  • A calculation of your current net worth
  • Information about your current cash flow
  • A retirement strategy
  • An investing strategy
  • An estate plan
  • A risk-management plan, which may include insurance policies and similar vehicles
  • A tax minimisation strategy

The key here is to have clear goals for the plan. Start with the end in mind so you can map out the steps needed to achieve your goals.

How Does Financial Planning Affect Cash Flow?

Your financial planner may talk to you about your current cash flow.

Understanding your cash flow means knowing where your money goes every month. It involves determining your income and highlighting all of your expenses. The goal is to generate enough income to cover those expenses. If you manage that, you’ll have positive cash flow and will be in a position to save or invest.

But if your expenses exceed your income, you have a negative cash flow. If you don’t rectify that issue, you’ll likely fall deeper into debt.

Good financial planning will help you budget effectively and reduce your expenses. This means you have more cash available to pay your bills and to execute other aspects of the plan.

How Often Should I Speak to a Financial Planner?

Creating a financial plan is not a “one-and-done” thing. Your situation and goals will change over time. This means you need to revisit your plan regularly to confirm that it still serves your needs.

Typically, you’ll have regular meetings with your financial planner. This meeting will give you a chance to revisit the plan and make adjustments for any required changes.

It’s Time to Create Your Plan

A good financial plan can play a huge role in helping you create financial security. It helps you understand your current situation and create strategies that bring you closer to your goals.

The key is finding a suitable financial planner. This planner can help you create a plan that’s relevant to your situation.

And that’s exactly what Modoras can offer to you.

Our Modoras team members are ready to assist you in your journey to financial security. Get in touch with our team today to find out how our financial planners can help you.

Resources:

https://www.forbes.com/sites/davidrae/2019/04/09/levels-of-financial-freedom/#76d1123e3860

https://www.ioof.com.au/financial-advice/understanding-financial-advice/how-financial-advice-can-help

IMPORTANT INFORMATION: This blog has been prepared by Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licences (Number 233209). The information and opinions contained in this presentation is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. Any individual making any investment or borrowing decisions should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to borrow funds or purchase, sell or hold any particular investment. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of, credit contract entered into or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog may change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.

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