Why proactive financial planning matters

18 Nov 2019

By Chris Youssef

If you're like most people, chances are you will only seek financial advice when a specific need arises. This is often triggered by an event or a change in your circumstances, such as receiving a redundancy or an inheritance, going through a separation, or the realisation that retirement is just around the corner.

However, rather than leaving it until the “last minute”, it’s a good idea to have a plan in place early to assure your financial security no matter what circumstances you may face.

Let's look at some of the reasons why taking a proactive approach to your finances is beneficial.

Stay on track to achieve your financial goals

Understanding and writing down your short, medium and long-term goals is an important first step in helping you focus on achieving them. Consider for example, the lure of a holiday or a new car. It's likely you will make changes to your spending habits to allow you to achieve these purchases. Without having these goals in place, you may not necessarily accumulate the necessary funds.

When it comes to more significant expenses such as owning your own home or having enough money to live comfortably in retirement, these goals take time and often decades to achieve. Without a smart financial plan in place, you could find yourself struggling to meet your goals.

Seeking financial advice early will give you the best chance of reaching those all-important long-term financial objectives.

Protect your estate and your family

Your health is your most important asset: it allows you to care and provide for yourself and your family. If you were unable to work, required full-time care or weren't around anymore, would your family be able to maintain the lifestyle you intended for them? Could they afford to keep the family home? Would your children still be able to have the same education?

A person who only seeks advice when they experience the death of a spouse, or when they are diagnosed with an illness, can find themselves at a significant financial disadvantage if adequate insurance cover isn't already in place.

While we can't always prevent the worst-case scenario, we can protect ourselves and our loved ones with tailored personal insurance plans and a carefully considered estate plan.

Grow your wealth effectively

Let's suppose you have a financial strategy in place that allows you to most effectively manage your tax, and that you use those tax savings to invest over a one-year period. Alternatively, let’s say you proactively sought financial planning advice and took the same steps 30 years earlier. How would the results differ?

It’s clear which of the two scenarios would be likelier to have a better outcome. The difference between these examples might be the reason why you can't afford to retire at age 60, or why you can't achieve your desired lifestyle in retirement. This may sound like commonsense, but many people don’t take the most tax-effective approach to saving and investing.

Unfortunately there is no one-size-fits-all approach to financial planning. However, taking a proactive approach with your finances and obtaining the right advice early on will put you in a better position to achieve your goals.

It’s never too early to start planning for your long-term financial security. Talk to a financial adviser near you to get started.

Educational guides