Financial Planning

Daniel Brown

Financial ExpertUpdated on May 25, 2022

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A 2021 survey by the Australian National University (ANU) shows that over 55% of working Australians fear they won’t have enough savings to live a comfortable retirement. The survey results highlight the importance of financial planning.

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Financial planning is an important factor in securing financial independence during retirement years. Starting your financial planning as soon as possible helps ensure peace of mind.

Sean Pollock | Unplash

What Is Financial Planning? 

The financial planning process involves estimating the capital you need for retirement. This process is done by allocating, investing, and managing personal funds for your financial future.

Financial planning involves creating a client-planner relationship by doing the following steps:

  1. Analyse and evaluate your current financial status
  2. Develop financial goals for every stage of life
  3. Identify financial planning recommendations
  4. Evaluate options or alternative action plans
  5. Develop and implement your financial plan
  6. Monitor and review your financial action plan

The process of achieving your financial goals is more complex than simply saving money. Financial planning is a key component of managing investments, regulations, and taxation.

A certified financial planner has the knowledge, skills, and experience to help you reach your financial goals. They should also maintain high ethical standards to protect your nest egg until you retire.

Key Financial Plan Inclusions 

A financial plan is an overview of your personal financial goals. Each financial plan is different since individuals have different financial situations.

The five essential elements include:  

1. Cash Flow Analysis – this should indicate a link between your current personal assets and debts. For example, it’s crucial not to spend more than you make.

2. Risk Management – consider the need for aged care due to illness or disability that could render you unable to work.

3. Investment Management – you can use several methods and strategies to invest your funds or surplus income. Each one has different risk and return features and taxation implications.   

4. Retirement Planning – this helps you to plan for when you decide to retire. Your plan should consider post-retirement income and lifestyle goals that boost government entitlements.  

5. Superannuation Planning – your superannuation funds are likely to be one of the biggest investments. The general advice is to maximise financial opportunities, including investments analysis, allocation, fees, and taxes.

6. Taxation Planning – tax management is important to protect all investment returns. You can leverage several tax-reduction procedures and strategies to create wealth and tax-free income.

What Is Wealth Management?

The Reserve Bank of Australia (RBA) defines wealth management as various types of super fund management, including managed funds, superannuation, and life insurance. 

Essential components of wealth management include:

  • Financial advice
  • Cash management solutions
  • Investment advice and management
  • Estate planning
  • Wealth transfer
  • Life insurance

In 2020, it was reported that Australia had the world’s fourth-largest pension system. This statistic demonstrates the importance of wealth management for Australians who are in retirement or approaching retirement. 

Setting Financial Goals

When setting financial goals, it’s not just the number that matters but the process itself. More importantly, it’s about establishing good habits.

Identify your financial goals by:

  1. Preparing for financial emergencies and unforeseen circumstances by creating an emergency fund and setting a savings goal.
  2. Budgeting a 10-year financial plan  
  3. Tying your long-term savings and investments to intermediate-term goals like a car down payment. You can then make financial decisions to save or invest money.
  4. Setting long-term financial goals – for example, steps related to financial freedom create clear and achievable goals, like retiring by 65.

Choosing a Financial Adviser

A financial planner helps individuals achieve long-term financial goals, resulting in greater financial wellbeing. 

The Financial Planning Association of Australia (FPA) is the nation’s largest financial planner association. Many members are Financial Adviser Standards and Ethics Authority (FASEA) approved. 

Such advisers can provide further information and a customised investment strategy that caters to your specific needs and financial goals.

Choosing the Perfect Financial Adviser

The right financial adviser will work with you to understand your situation in order to determine your financial goals. They will then help you create a plan to achieve those goals.  

In Australia, a financial adviser (also called a financial advisor) is required to secure an Australian Financial Services License (AFSL) and have an Australian Business Number (ABN), identifying their business to the government and community.

It’s normal to meet with several advisers before choosing one that’s right for you.

Financial planning is an important process to prepare for your future retirement life. Your first step is to determine the best choices when selecting from numerous  investment and savings options.  

Need any help with your financial planning? Request a call from our financial experts now!

References

  1. The Australian National University. (2021, May 5). Most Aussies say things look dire for when they retire. Retrieved from https://cass.anu.edu.au/news/most-aussies-say-things-look-dire-when-they-retire
  2. Tang, E. (2020, Apr 10). Sound fundamentals: Australia now home to world’s 4th largest pension assets. Australian Trade and Investment Commission. Retrieved from https://www.austrade.gov.au/news/economic-analysis/sound-fundamentals-australia-now-home-to-world-s-4th-largest-pension-assets.

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This is a model, not a prediction. Amounts and repayment periods are estimates only, actual amounts may be higher or lower.

  • It applies to loans where your regular repayment includes both interest and the gradual repayment of the amount borrowed.
  • Initial inputs will be displayed on the left hand side of the graph. Your ‘What if’ scenario (if applicable) will be
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Disclaimers

This is a model, not a prediction. Amounts and repayment periods are estimates only, actual amounts may be higher or lower.

  • It applies to loans where your regular repayment includes both interest and the gradual repayment of the amount borrowed.
  • Initial inputs will be displayed on the left hand side of the graph. Your ‘What if’ scenario (if applicable) will be
    displayed on the right hand side of the graph.

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Disclaimers

This is a model, not a prediction. Amounts and repayment periods are estimates only, actual amounts may be higher or lower.

  • It applies to loans where your regular repayment includes both interest and the gradual repayment of the amount borrowed.
  • Initial inputs will be displayed on the left hand side of the graph. Your ‘What if’ scenario (if applicable) will be
    displayed on the right hand side of the graph.

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Disclaimers

Disclaimers

This is a model, not a prediction. Amounts and repayment periods are estimates only, actual amounts may be higher or lower.

  • It applies to loans where your regular repayment includes both interest and the gradual repayment of the amount borrowed.
  • Initial inputs will be displayed on the left hand side of the graph. Your ‘What if’ scenario (if applicable) will be
    displayed on the right hand side of the graph.