Real Financial Planning
At its simplest, Real Financial Planning is identifying how much money you really need for the rest of your life and then identifying the steps that need to be taken to make sure that your money will last as long as you! The fact is the majority of people have no idea where they are heading financially. They may have assets, investments, and/or high levels of income, but most people have no idea what it all means, or what sort of financial future awaits them.
Having an insight into how much money you actually need can be enlightening. It can put you in control. Knowing how much is enough will give you the freedom to live your life smarter. After all, life is not a rehearsal; it needs to be lived to the full.
The NUMBER is the amount of money you need for the rest of your life – not just to survive but to live it to the full. It’s different for each of us, of course.
Once you know your NUMBER the next step is to build a lifelong strategy for investing your money. A strategy that is based on sound academic principles rather than the latest fad, and which will stand the test of time.
There are seven key components of a sound lifelong investment strategy – the Art and Science of Investing as we like to call it.
Asset allocation. The overwhelming factor in determining investment performance
Rebalancing. Keeping an investment portfolio’s risk and return profile on course
Lowering costs. The one factor guaranteed to improve returns
Behavioural coaching. Avoid the costly mistakes of giving in to fear and greed
Tax allowances. Tax-efficiency is key to getting the best results
Spending strategy. Crucial to maintaining the value of a portfolio in retirement
Total return versus income. Making the most of a portfolio for both income and capital
Over the coming months we will address each of these areas.
Footnote: I am often asked why Fort Financial Planning uses the phrase “Real Financial Planning”. A real financial planner provides “comprehensive planning” taking into account ALL of your circumstances – i.e. the cost of your current and desired lifestyle, your long-term objectives, all your assets, all inflows, all outflows, your Wills and Powers of Attorney. In other words, their job should be to show you what is going to happen to your financial bucket – making sure that you never ever run out of money in any circumstances (including the doom and gloom scenarios). Sadly, most financial planners (they used to call themselves financial advisers) don’t do this, they are simply product salesmen.