The 5 W’s of Financial Planning

March 10, 2021
March 10, 2021 studio55

Why Financial Planning

Let’s start with why because one of the most important parts of financial planning is the Why?

For each person, the why will be different. Most people will all roughly have the same high level goals such as –

  • financial independence
  • not having to worry about running out of money
  • ensuring that their financial affairs are well structured etc

The reasons someone will have their own financial plan will always be very different.

Some clients may want to retire over time. They might do this to help look after their grandchildren. Some will want to be able to trek Machu Picchu when they are young and fit. Some may want to be able to take their extended family on holiday year in, year out. It doesn’t matter what the why is.  But it is important to identify it and work towards it. When we work out the why then we can start the process of understanding what financial planning is.

What is Financial Planning?

Financial Planning is about helping people to find a balance. That balance is between their income, current expenditure levels and future expenditure needs. Wait, is that it? Well yes that is all financial planning is (kind of). There are many other, in depth ways of explaining the concept of financial planning.  There are big words that can help explain how financial planning work. But I intend this to be a somewhat simple read (I hope) that won’t be too confusing and full of jargon.

Who would have a financial plan?

Everyone should have a financial plan of some description. That doesn’t mean everyone needs a huge in-depth report.  Not everyone will need all the detail of their spending replayed over the course of their life. Everyone should consider having a personal roadmap of their financial planning.  This is their financial plan. This may be as simple as writing down some goals and how they might start the journey of getting there. There aren’t many people who would consider taking a road trip across say America without having a plan.  They will consult a map or use a sat nav to give them directions. Well life is a long journey. If you want to know where your finances will take you then a financial plan would be quite helpful.

When should I start thinking about financial planning?

This is always an interesting question. You might think that you will only need a financial plan when you’re in a position to invest money. Or if you are of a certain age (some people think you need to be in your 40’s to need a financial plan). But you can start thinking about financial planning at any age.  In fact, the sooner the better.  Someone in their 20s’ who has started a new job needs to consider their financial planning needs. They need to just as much as someone in their 50’s who is planning for retirement in the next few years. What would happen to our twenty something if they weren’t able to work for an extended period or even ever at all?

We see that there is a real lack of financial understanding in society. That is part of our why here at Modulus. People have many questions about financial planning. They often don’t know who to turn to. They sometimes don’t know who to trust. They need help understanding the workings of the products out there. People need a guide to help cut through all the jargon and sales patter. Some people are afraid to ask a question in case it sound silly and that should never be the case. Over time we would like to build a portal for clients and their families.  The aim would be to help increase financial education and understanding. It would have articles and tips to help people with all aspects of financial planning. But for now, please bear with us or feel free to drop us a line with any questions.

Where to begin?

Identifying and understanding “Why” is huge when beginning the financial planning journey. Goals need to be set for a successful financial planning journey. If there are no goals, then it is a case of accumulating money for no reason other than to have it. Taking the time to speak with an Independent Financial Planner will help with this.

Some people don’t think they’re ready to speak with a Financial Planner. There are still steps that can people can take to start the journey though. One of the easiest and most effective things to do is to make a list of spending. Record it on a spreadsheet or even write it on a piece of paper. The best way to do this is to look at bank statements. Also look at credit card statements (if used). This makes sure actual figures are being used rather than guess-timates! The results may well prove surprising. And do this for the last 6 months statements at least. This will help to give a longer-term view of spending. It will help to smooth out the effects of the expensive months that everyone has. Remember there are times when spending will be higher e.g. holidays, family birthdays etc.

Once there is a log then creating a budget becomes a much easier task. This is because of there is a better understanding of spending trends and habits. Adding funds to a specific goal at the start of the month will create discipline. Do this after payday. Don’t set out to try to save excess funds at the end of the month.  This won’t work because something will always “be found” to spend it on! Pay yourself and your goal pot first. This creates positive action towards reaching the elusive “Why”.  Which is of course different for everyone.

The thing to remember is that Financial planning is a way of helping people to live the life they want”.

If you want to start your financial planning journey then feel free to drop us a line to arrange a 15 minute chat. We can do this either online or at our offices over a coffee (at no charge). We’ll even supply the coffee.

And it’s ok if you’re not ready for a chat but want to get started.  Take the first step! Download our One Page Annual Budget Planner.

If you’ve any questions then you know where to find us!

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Modulus Financial Planning

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BT32 4AP, Co.Down, Northern Ireland

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