As we continue our busy lives day in and day out it can be hard to take a step back and consider what your long term goals are and devising a plan on how to get there. We often focus on the here and now as there is always something demanding our immediate focus. With the current environment throwing more and more challenges at us this has never been truer. I believe the following quote (Source Unknown) sums up a financial plan quite well ‘Give me six hours to chop down a tree and I will spend the first hour sharpening the axe’. A solid financial and business plan is the sharp axe required in navigating this challenging environment.
Key Steps to Devising a Plan
1. Set your goals and objectives – The first step of a plan is to determine what you want to achieve in the short and long term. This could include retirement age, short and long term business goals or even a goal to buy a caravan and travel.
2. Review your Current Position – Set out how you are currently positioned. Note your assets, liabilities and understand your current cash flow. Budgeting and reviewing cash flow can be a mundane exercise however, it establishes the backbone of your planning.
3. Seek Expert Advice to Devise Plan – In order to develop a thorough plan, it is highly likely you will need to seek advice to assist. Specialists in accounting, finance and lending will assist in devising strategies to suit your situation. As you are an expert in your field, they are experts in their fields. If these specialists have your key goals and objectives in mind, these strategies will align to formulate your overall plan.
4. Review your Plan – Once your plan is in place it is important to regularly review it. This not only involves ensuring the strategies remain relevant but also tracking your current position towards meeting your goals and objectives. In addition, as time goes by, your goals and objectives may change and hence your plan will need to change accordingly.
To start you thinking about what you may plan for, I have summarised below some key areas which may be included in your planning.
Budgeting is a key component of a financial plan for not only business cash flow but also personal cash flow. At the end of the day it is cash flow that keeps both our business and lifestyle moving forward. We prefer to refer to a budget as a spending plan. As what you are trying to achieve is estimate your cash inflow and then devise where you would like to spend that cash flow. By establishing a spending plan, you can prioritise areas where you would like to direct cash flow (e.g. savings for a holiday) and identify areas where you may be able to make savings and pay out debt earlier (e.g. credit card debt).
A key component of reviewing your spending plan is reviewing regular ongoing expenses such as finance payments, utilities and insurances. These should be reviewed to determine if you can achieve the same level of quality service or product at a more competitive price. The savings can then be focussed into the areas which will further assist in meeting your goals and objectives.
A cash flow buffer will also assist in providing comfort so that in the event that unforeseen events may occur, you will be in a position to ride these out whilst making changes to your business or personal structure.
It is a common misconception that superannuation in its own right is an investment. In fact superannuation is effectively a tax structure. Superannuation is designed to provide incentive for Australians to save for their retirement. For those employed by an employer, there are mandatory payments required to each employee’s superannuation. However, those who are self-employed can often neglect considering superannuation as part of their overarching plan. Superannuation does have a vast number of rules regarding contributing and withdrawing money to mention a few however, this structure can be a key pillar to your overarching strategy. Given the complexity of this area it would be likely that you will need to seek advice to assist you.
Given the amount of hard work you have put in to be in the position you are today, it is important to protect this. Not only should the assets which you utilise be protected but also your income. Without income it would not be possible to proceed in achieving your financial goals and objectives. Therefore, it is important to have appropriate insurance cover that is regularly reviewed to protect the areas that are important to you.
In summary, a thorough and robust plan will assist in blocking out some of the current distractions to help keep focus towards your overarching goals and objectives. I hope this article has assisted in making the first steps to devising a plan for a great future. It is never too late to start planning AND the best time to start is now.
Please contact Integrity One if we can assist you with this or any other financial matter.
Phone: (03) 9723 0522
Suite 2, 1 Railway Crescent
Croydon, Victoria 3136
This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.