No two people have identical financial circumstances, which is why it is essential you have a tailored financial planning solution in place that meets your individual needs and investment goals.
Goal-based financial planning will help you invest in a systematic and disciplined manner to achieve your goals. It also enables you to remain focused and unaffected by short term volatility in markets.
Making wise financial decisions
If you do not know where you are going, how will you know when you get there? This is very true about financial goals.
You need to set financial goals to help you make wise financial decisions, and also as a reward for your efforts. Goals should be clear, concise, detailed and written down. Unwritten goals are just wishes.
You will need a plan
Goals might be to maintain your same standard of living (planning for retirement, or in the case of an entrepreneur, anticipating the sale of his business), buying property, paying for children or grandchildren’s education, passing on a proportion of your wealth, making charitable donations, covering unplanned financial needs, etc. Each of these goals will make up a specific portfolio.
But in order to achieve all of your goals, you will need a plan. Starting from assets you already have available, you will need to determine how much more you need to accumulate and when you will need it.
What you need to consider
Do not neglect to consider that the price of your goal items might actually increase as well. Depending upon how you invest your savings over time, you might receive interest, dividends or capital gains to help you along – you should consider this as well.
Your financial and personal goals need to be as specific as possible, because otherwise they will not give you enough direction to follow through. Look at your goals like a lamp lighting the way – the brighter the light, the clearer the road ahead. If you do not have clearly defined goals, you procrastinate. Think about your life and what you want to achieve, and what action you need to take to achieve the outcomes you want.
Give yourself realistic deadlines. Adding specific dates, amounts, etc. makes your progress quantifiable to complete your goal and visualise a finish line.
Be honest with yourself and set realistic goals. Decide what you want to accomplish. So, start with the goals that are highest on your priority list. It’s easy to be overwhelmed by everything that needs to be done, so start simple.
Align your goals with the direction you want your life to take. Balancing the alignment between long term and short term will give you the focus you’ll need.
Having a finish line will mean you will get to celebrate when you accomplish your goal. Having set deadlines gives you a sense of urgency that is lacking when goals are open-ended.
Setting realistic goals
Each goal will be assigned an amount, an investment period, a level of risk and an order of priority. Do you have the means to make additional investments necessary to accumulate the required assets to achieve your goals? Don’t neglect to consider the effects of taxes on your savings and investments.
After considering the foregoing, you might determine that you can achieve some goals in less time. Or you might find that it could take longer. The time horizon is important to setting realistic goals.
Growing your wealth
Goals based investing
- Cash flow modelling
- Creating a financial roadmap
- Investment objectives
- Timescales and market activity and the impact of losses
- ‘What if’ scenarios
- Discussing legacy planning with your loved ones
- Inheritance Tax (IHT)
- Inheritance Tax Residence Nil Rate Band (RNRB)
- Lasting power of attorney
- Lifetime transfers
- Making a Will
- Preserving wealth for future generations
- Protecting your assets for the next generation
- Slicing up your wealth pie
- Children’s pensions
- Defined benefit (or final salary) pensions
- Defined contribution pensions
- Personal pensions
- Self-Invested Personal Pensions (SIPPs)
- The state pension
- Annual allowance and lifetime allowance limits
- Busting myths about pensions
- Increases to pension age and new normal minimum pension age
- Pension freedoms
- Pension withdrawal methods
- The lifetime allowance
- Delaying retirement
- Generating income from investments throughout your retirement years
- Importance of a retirement wealth check
- Retirement goal setting
- Retirement planning
- Reviewing your retirement plan
- Staggered retirement
- Taking control of your retirement plans
- What can I do with my pension?
- What happens to my pension on death?
- Market timing
- Minimising risk
- Multiple asset classes
- Portfolio insulation
- Pound cost averaging
- Principles of investing