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Thinking Ahead - Planning your savings

The type of lifestyle you have in retirement will be influenced by your financial situation. Planning your savings is best achieved by having a well-constructed and flexible financial plan.

Thursday, October 28th 1999, 12:00AM

by Philip Macalister

The type of lifestyle you have in retirement will be influenced by your financial situation. Planning your savings is best achieved by having a well-constructed and flexible financial plan.

It is never too early and never too late to prepare a financial plan.

However, many people are not aware of what a financial plan is or how it can help them.

A financial plan is very similar to a roadmap for a traveller on a journey. It shows where the traveller is now, where they would like to go and the various ways to get there.

A financial plan sets out your current financial situation, your financial and lifestyle goals and how you intend to achieve your future goals. It will also take into consideration how tax will affect your investments. A good financial plan is the basis of planning your secure retirement and having the life you want.

The basics

While a financial plan may sound complicated it does not have to be. There are some basics that will help you establish an effective plan. First of all, work out your income and what you spend it on. If you think you are spending too much now, you may need to make some adjustments. Then, look at your debts. Are they manageable? When will they be paid off?

You then need to look at the amount you have already invested and any additions you intend to make to these investments. Will this be enough? Are there any changes you need to make?

Thinking ahead and developing a sound financial plan will help provide you with comfort and peace of mind knowing your finances are in order.

Recognising change

Drawing up a financial plan is not something you do once and forget.

Your financial situation can change at any time. Your family situation may change or you may receive an inheritance. You may need to replace the car or decide to go on a holiday. Your goals may even change. This means your financial plan should be reviewed regularly (at least once a year) or if your situation changes, then immediately.

Putting together a financial plan

Drawing up a financial plan may involve important decisions with long-term implications. It requires detailed knowledge about the investment markets and an understanding of taxation, social welfare and estate planning issues.

We recommend you seek professional advice to help you develop your plan. A financial adviser will help you set up a financial plan and advise you on which strategies and investments will best suit your needs.

How to choose a financial adviser

Choosing a financial adviser is a very important personal decision.

Personal recommendations are a good way to start looking for a financial adviser. Ask your friends, colleagues or the Human Resource section at your work if they know of anyone who can help you.

It is essential for you to feel comfortable with your adviser, because in order to develop an effective plan, you will need to provide your adviser with a great deal of personal information including your goals and your current financial situation.

Some questions you should ask a financial adviser

You should ask your adviser for a copy of their investment adviser "disclosure statement". The information provided in this will cover off many questions you may have about the service they will provide.

About them

  • What area of financial advice are you qualified in?
  • Do you have any other qualifications?
  • What is your past experience?
  • How do you keep your knowledge of current trends up to date?

What can an adviser do for me?

  • What services can you provide me?
  • What written advice do you provide?
  • After you have developed my financial plan, what ongoing services do you provide?

How they are paid for their services?

  • How would you be paid for developing a financial plan for me?
  • What will you charge me for your ongoing services?
  • Do you get any other benefits from placing my business or managing my affairs?

What to expect from an adviser

When you deal with an adviser, you can expect to find your way through the financial maze with more confidence. After an initial discussion, your adviser should:

  • Collect and analyse all relevant information about you.
  • Identify your financial goals and establish your priorities.
  • Review your financial commitments.
  • Provide written recommendations.
  • Discuss these recommendations with you, make any changes and then help you implement the recommendations.
  • Monitor and conduct regular reviews of you plan to ensure your financial plan continues to serve your needs and goals.

What will a financial plan cost?

When seeking professional advice or making an investment of any kind, there are usually costs involved – either in the beginning or at the end.

For example, buying or selling an investment property, real estate agent fees, legal costs may be incurred.

Generally, advisers are paid by way of fees for services to the individual or through commissions on investment products. In some cases, it may be a combination of these.

Remember, it is your money. Do not be afraid to ask your financial adviser what the costs are.

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