PLANNING YOUR OPTIMAL FINANCIAL POSITION – DON’T DELAY, DO IT EARLY, DO IT NOW!

Discipline, planning, risk assessments and collaboration with specialist subject matter experts with a view to achieving common organisational goals are accepted (even expected) everyday activities of people in the ADF.

And yet, when it comes to articulating and achieving their personal and family financial goals, many of our members fall short. They will often claim to be so busy in their professional careers that they simply don’t have the time to concentrate on their own circumstances, at least not yet. As a result of this “I’ll put it off to another day when I’ve got more time” attitude, time flies past (quicker than they think), until one day, transition or retirement day is imminent and there’s a mad and stressful scramble to understand superannuation arrangements, how post-ADF life might look and how it can be afforded. 

Having observed on many occasions such an avoidable and sometimes costly phenomenon, we offer this article with a view to encouraging ADF members to think and act now (not tomorrow, next week or next year) about their personal financial situation. In fact, with a healthy dose of motivation and planning, great results can be achieved. It’s rarely too late…so don’t delay, do it now!

We also know from observation that some ADF people are confident and self-directed about their financial affairs. This group has thought through the issues, have acted positively and on a timely basis without further advice or motivation. But they are in the minority.

We know that most people will benefit from some third party financial advice, motivation, reinforcement and encouragement. In that regard, they may find it useful to work with a licensed financial adviser to develop and implement a plan of action. We’re certainly not suggesting that working with a licensed financial adviser is the only way to go, but we know that doing so helps many people to get started down the path of achieving financial self-sufficiency and independence.

The key point here is that if you feel you might benefit from the advice of a licensed financial adviser, we recommend making contact with one early, not at the last minute when the benefits may be minimal or at least not nearly as great as they could otherwise be with some careful long term planning.

Here’s a short list of those benefits:

1. Improved long-term financial results

Starting early gives you more time to benefit from the magic of compound interest on your investments, both inside and outside of superannuation. A licensed financial adviser can help you to create an investing plan that’s consistent with your financial goals over decades, not just years or months.

2. Clear goal-setting

A trusted adviser can help you to identify your short, medium and longer term financial goals, such as buying a home, funding your children’s education or retiring early, and then working with you to develop a plan to get there. While no one knows what the future holds, having goals and a plan to achieve them creates certainty and motivates action.

3. Improved financial habits

Early advice helps you to adopt disciplined financial habits, such as budgeting, saving, harmful debt avoidance, and giving priority to more important financial decisions (such as maximising your superannuation over buying an expensive car that you don’t really need).

4. Risk management

A financial adviser can help you to define and manage risks, such as in investment markets, life insurance levels required to cover high levels of debt, the impact of income loss, unplanned expenses and interest rate movements. The list is a long one. Discussing all of these issues and developing strategies to deal with them before they occur will make a big difference to a family’s peace of mind and confidence about their financial position.

5. Tax Planning

Tax planning (and its related area of estate planning) is most effective when implemented early and carefully. An adviser can help you to choose tax-efficient bank accounts and legal structures; time sales and withdrawals optimally; and structure investments in ways that (legally and ethically) lower your family’s tax obligations. Furthermore, an adviser can work with you, your accountant and your lawyer to ensure your Will/s, Powers of Attorney and related structures achieve the tax-effective outcomes you desire.

6. Avoiding silly mistakes

Early and considered advice helps to prevent common mistakes such as poor (and under) diversification, emotional and speculative investing, overpaying for products and services, or taking on unnecessarily high levels of debt (aka gearing).

7. Adjustments as life changes

Your family’s financial situation is ever changing, sometimes fast and sometimes by a slow process of evolution. This may involve career changes, marriage, divorce, buying property, buying shares, salary sacrificing into superannuation, having children, inheritance and retirement planning.

Starting early gives your financial adviser the complete picture, a better understanding of you, your family and what motivates everyone in the group. This more intimate knowledge by the adviser allows for smoother and better informed adjustments to your and your family’s goals and financial plans over the course of the years.

Reduced stress and logical decision-making

Starting early with a trusted financial adviser offering guidance along the way will increase peace of mind and help you to make important financial decisions based on strategy rather than emotion or poor information.

The Next Step

Having said all of this, the next step (if you feel the need for advice) is how to identify a trusted licensed financial adviser who will act in your best interests. You can never be absolutely sure about this, however, we recommend starting the process of investigation by reading the section on our website about choosing a financial adviser.

This will lead to our short film Financial Advisers – The Facts and the Fiction. Viewing this will be a most worthwhile investment of about 10 minutes of your valuable time to learn about how much of the financial advice industry operates.

After that, you may like to review our list of “remuneration conflict-free” advisers at the ADF Financial Advice Referral Program. Of course, you’re not required to use the advisers in our Program, but we offer them as a starting point in identifying a suitable and trustworthy long term adviser with who you and your family can confidently consider developing a long term professional relationship. There’s a complete list of all the licensed financial advisers in Australia on the MoneySmart website.

Last but not least, you might like to test your understanding of the financial advice industry by undertaking our Financial Advice Quiz. 

A word of warning…..

Financial advice can be expensive (think thousands of dollars, not hundreds), so make sure you understand the cost of the advice (both up-front and ongoing) and its scope before appointing someone to advise you.