It may seem obvious, but financial planning is about the future. Specifically the question of – what are we doing now to give us the future that we want? It is poor financial planning though that focuses only on the future and ignores the present.
Too much financial planning advice advocates sacrifice now for a mythical ‘retirement’ of luxury and leisure. Good financial planning however balances your need to live the life you want both today and tomorrow.
How do you know if the balance is right? Most of us lead a pretty good lifestyle, spending a bit, some money flowing into super, maybe paying down the mortgage or investing on the side, but what is the right balance to live today and activate the future you want?
It all comes back to your goals, what do you want out of life? A balanced cash flow plan gets the mix right between:
• Paying for your living costs – the stuff you have to pay for;
• Your lifestyle costs – the stuff that costs money but you enjoy doing;
• And saving for the future – lifestyle spending for future you!
The actual mix is unique to you and your goals. Balance for someone with a plan to retire young and travel the globe in luxury will require a larger nest egg and more savings. If you love your job and plan to work forever then the balance may be spending a bit more on lifestyle today. Finding this balance is why financial planning is important to us.
A good financial plan, and by extension a good financial planner, will identify what your future goals are, when you are able to achieve them and how much money you will need. From there it is reasonably simple to determine how much you would need to save each month to meet those goals.
So the ultimate question is whether you can comfortably save that much for your future lifestyle while still living the life you want today? If not, then decisions will have to be made to make this equation balance – earning more, spending less today or lowering your expectations for the future.
A good financial planner will ask the right questions to help you get the balance that is right for you. If you need to define your goals and get your financial balance sorted, book in for a Complimentary Consultation with the Eqeus team.