5 things to include in your financial plan

5 things to include in your financial plan

A financial plan is as important as any other strategic plan.

You wouldn’t try to build a house without a plan, and it makes sense if you’re aiming to build some financial freedom or wealth for retirement, that you would have a plan.

A good financial plan is one which clearly details your current financial situation, your goals and the actions you are going to take to achieve those goals.

In a very simple example, you might be renting and your goal is to buy your own home. You would then have to put in place some steps or actions such as ‘save a deposit of $100,000’. 

Of course, you can engage a professional advisor to help you, but whether you create the plan yourself or get some help, there are some key things you’ll need to include:

1. A well-defined goal – if you are setting goals, it is really important to be very specific about the nature of that goal. We recommend putting enough detail into the statement of the goal so that it is easy for you to see progress towards that goal over time.
2. A time frame – any goals you have or actions you are taking should have timeframes on them. You may not hit all these exact timings, but at least you’ll be noting when you want to achieve certain outcomes.
3. Detailed action steps – the more detailed you can be on the actions you need to take to get to a goal the better. We find it is really useful to break down projects into smaller and smaller steps that you can take. This makes it easier to confront and get things done on a shorter time scale. Remember the journey is important in reaching the destination. 
4. The numbers – like the actions, it is useful to break down and provide numbers on each of your investments, and where you need each to be to reach goals. For example you might have $20,000 in cash, and you are targeting to have $200,000 in cash in 5 years. Dividing these numbers into smaller and smaller timeframes – like quarterly and monthly will help you track progress.
5. Risk Mitigation – we always think it is useful to identify any risks to you not getting to your plan and putting in some notes about what you are doing to minimise risk. This might be a strategy to sell shares if they drop by 5%, or it might be taking out a life insurance policy for the key income earner in your family.

Too few people retire with enough resources to have a comfortable retirement. A good plan will increase your chances of successfully navigating the journey to your financial goals and your eventual retirement. 

For example, according to the Association of Superannuation Funds of Australia’s Retirement Standard June quarter 2021 figures, the income a couple would need to have for a comfortable retirement at around age 65 would be $63,352 per year. This amount also assumed that they would own their own home. 

The current Aged Pension for a couple is $37,923.60, this leaves a deficit of $25,428.40 each year. This income would then need to be sourced from other avenues, such as investments, superannuation or continuing to work. Each of which can then further reduce the amount of Aged Pension a couple is eligible to receive, depending on various factors.

Retirement planning can be complex and difficult to map out. Don’t leave it to chance. Create and work your financial plan. And that is 5 things to include in your financial plan.

Call the team for a private, no-obligation discussion about your financial plan.

The information in this article is general in nature and does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.