Friday, 18 January 2013

Elements of a financial plan

Once upon a time, the Millionaire on Heels did a graduate diploma in financial planning.  The fairytale ending was meant to be a new career advising clients on how to build wealth successfully.  However, the dream soon ended with the realisation that the vast majority of financial planners are product salespeople who are remunerated to sell their financial institution’s or recommended platform’s managed funds.  Anyone feel free to challenge me if you know a financial planner who is different.  I have to say I’ve visited a few personally, and have never found one willing to prepare a plan that didn’t include his/her incentivised products.

So, taking into account all my disclaimers at the bottom of the screen, if you want to make your own way independent of the product salespeople, here’s how I’ve learned to prepare a financial plan.

Step 1 – Assess Your Current Financial Position

I think it might be more exciting to start with Step 2, but Step 1 helps you to be a bit more realistic about your starting point.  The purpose of this step to obtain a clear picture of your assets and liabilities, plus your income and expenses.  The key word is expense tracking.