Financial plans fix more than problems

Let’s explore this concept with a hypothetical couple, David and Karen, both 57.

They have spent decades working, raised their family and are still employed in careers they enjoy. Between them, they earn a comfortable income, own their Melbourne home with a manageable mortgage, and have accumulated superannuation. They don’t consider themselves wealthy, but they aren’t struggling either.

Their financial problem is uncertainty. Could they retire at 65? Should they pay additional money off the mortgage or contribute more to super? Are their super investments appropriate? Could one of them reduce their working hours at 62? How much income would they actually need in retirement?

Without a plan, these questions remain unanswered. Doing nothing becomes a financial decision in itself.

A professional financial plan establishes where you are today and where you want to go. Retirement planning should consider expected income needs, existing savings, mortgage and other debts, your preferred retirement timing, housing and even the legacy you would like to leave. For David and Karen, the first benefit of advice may simply be clarity.

They might discover they are already closer to their retirement goal than they thought. Alternatively, modelling may identify a shortfall that needs to be addressed. Either outcome is useful because uncertainty has been replaced by information.

From there, a First Financial adviser examines how superannuation, investments, debt reduction, tax strategies, and retirement income can work together, rather than treating each financial decision in isolation.

There is a direct correlation between retirement planning and retirement confidence. Industry research indicates that individuals and couples who invest in retirement planning and advice have a confidence rating of 7.5/10 compared to only 4/10 for those who don’t. That doesn’t mean creating a financial plan magically removes investment risk, inflation or unexpected expenses. However, it does mean you can start making decisions based on numbers and expectations rather than guesswork.

A comprehensive retirement plan can model your expected spending, superannuation, investments, other assets, debt and potential Age Pension entitlements. Importantly, it can also test different scenarios. What happens if you retire two years earlier? What if you spend more during the first decade travelling? What happens during a prolonged market downturn? Could you help your children financially? Can you afford to remain in your home?

These are the questions that turn a collection of assets into a retirement strategy.

When a gap appears between where they are and where they want to be, many clients’ first reaction can be: ” We need more money. That doesn’t automatically mean changing jobs, chasing a higher salary or working well beyond your preferred retirement age.

Often, there are opportunities within your existing finances. It may surprise you to know, but almost half of Australians have never made a voluntary superannuation contribution. Many review their investment strategy only every 2-3 years, don’t adjust their mortgage repayment plan, or don’t consider how surplus income can be invested.

For our hypothetical couple, a shift in financial strategy opens various positive options without requiring a career change or drastic financial upheaval. It requires their existing income and assets to work harder and more efficiently.

An advantage of financial planning is time. Small, consistent financial changes can have a meaningful effect on retirement preparedness.

Using our couple, starting at 57, gives David and Karen years to make adjustments. Starting at 64 dramatically reduces those options.

Time gives investment returns an opportunity to compound. It provides more years to make additional super contributions, progressively reduce debt and adjust investment strategies. It can also allow financial decisions to be introduced gradually rather than requiring significant changes immediately before retirement.

Planning is not something you do once and put in a drawer. Retirement planning is an ongoing process, with strategies adjusted as your circumstances, goals and financial position change.

Financial information has never been easier to find. Many Australians get financial advice from Google, friends, or their superannuation fund. Personalised financial advice is different.

Financial advisers provide personalised guidance. This is a critical difference. Most retirement decisions increasingly involve a person’s broader financial situation rather than a single product or account. By thoroughly understanding your finances, family, career, lifestyle, and what you want retirement to look like, we can build a strategy across superannuation, investments, tax, debt, Centrelink, and retirement income, and continue reviewing it as life changes.

You don’t need to completely change your life to improve your financial future. You need to understand where you are, know where you’re heading and start making the right decisions early enough for them to make a difference. With the right adviser by your side, you inevitably pull the right levers.

The team at First Financial comprises financial experts who help hundreds of Australians retire well and make informed, intelligent financial decisions. We cover everything from retirement and financial advice, investment and wealth management, superannuation and SMSF, insurance, tax, aged care, legal and lending services.

Contact us for holistic, well-rounded financial management strategies.