Specialist
Like many individuals, reviewing our finances is something many of us put on the long finger.
We often deal with our finances on a reactive basis – when a policy matures, when we need funds for an emergency or milestone event or when there is either an upturn or downturn in investment markets.
By having a financial plan it helps you understand what shape your finances are currently in? It also helps you determine what your financial net worth at a given time is? This is something not easily answered and it usually means having to dig out a whole pile of paperwork from folders or old storage cabinets.
So, what might you be unearthing and how can this help to build the bigger picture?
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Old investments and share certificates
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A number of pension plans detailing some possible deferred benefits
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Cash deposits
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Investment Funds
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Bank, Credit Union or Post Office Accounts
A well-structured financial plan helps you achieve your financial goals in a time-bound manner. However, having taken the time to put in place a financial plan, it’s hugely important to review the plan at least once a year. I meet so many people who do complete a financial plan and then forget about it. As your career develops your income changes and so do your financial goals. Sometimes your goals may not change that much but the environment around you does through the arrival of family.
Reviewing your financial plan lets you understand the progress you have made in the past. You can also measure the growth over a period of time – both of your portfolio as a whole and of individual investments. This in turn allows you to make informed decisions about altering underperforming investments or stocks and taking corrective action.
This review of your plan helps you to be proactive about your finances by setting goals and planning for the various stages of your life.
The importance of having a financial plan is not exclusive to high net worth clients or individuals who are close to retirement and it is constantly relevant throughout your working life. In putting in place a financial plan you will need to consider when you need access to your investment funds or cash deposits. Investment history tells us the longer you leave money invested the greater the potential for growth and there is a key difference between “time-in” and “timing” when considering all investment options. It’s also important to understand what restrictions (if any) are placed on your ability to withdraw money from your investment plan.
The greatest comfort our customers get from having a financial plan is quite simply “Peace of Mind”. You are trying to prepare for the future and this approach has its own limitations as financial planning is not an absolute science.
By reviewing your financial plan you are giving yourself an opportunity to check if you are on track and in doing so the taking of any required corrective action ensures you will continue to enjoy a good night’s sleep.
By Conor Murray : CMCC Financial Solutions