What must I ask to plan well?
What questions should you ask yourself when you do your financial planning?
Ask yourself about facts and data as well as questions of self-discovery.
The questions are usually more important than the answers.
Concentrate on two types of question. Ask yourself questions to obtain all the facts and data you need to know to draw up a financial plan. Then, and more importantly, ask yourself those important questions of self-discovery. It’s answering those questions that will help you move forward and develop. In many ways, the questions are more important than the answers.
Start with an exploration of your essential principles. What are those truly profound life goals you want to achieve? Ask yourself about the values by which you want to live. Ask yourself who you are and explore your strengths and weaknesses.
Remember that conversations change lives. Talk to your spouse or partner, your children, your friends and colleagues, and your financial planner.
Question your money emotions
Money can give rise to the strongest of emotions – anger, fear, envy, shame, etc., so question your attitude to money and your relationship with money. It is vital to work this out because these emotions, often originating in early experiences with money, can hamper your ability to achieve your goals. So, is money, emotionally, your master or your slave?
If you are working with a financial planner, ask yourself what sort of a relationship you want with that person. What do you want them to achieve with you?
Look outside yourself. Consider opportunities that could be of help to you in the future. Also, ask yourself what threats you should address, such as stock market volatility, inflation, longevity, long term disability etc.
Consider your attitude to risk and return. What is my approach to inflation? What is my reaction to stock market volatility? At what size of fall in my investments would I get uncomfortable? Is long term protection from inflation more important than protection from short term volatility, or vice versa? Consider taking a risk profiling questionnaire as a way of helping you answer these questions.
Hit the numbers
Next, hit the numbers. Calculate your worth. Work out what you earn and spend. Prepare your financial statements of assets, liabilities, income and expenditure to answer the question: what is my current financial situation?
Ask yourself, does my income exceed my expenditure, or vice versa (something you should now be able to answer)? Cash flow is the key to financial planning.
Now, you should be in a position to start the real business of financial planning, namely creating a financial planto support you in the achievement of your life goals. It is worth subscribing to a lifetime cash flow programme (or creating your own on a spreadsheet), so you can start looking at “what-if” scenarios.
Photo: Yolanda Sun
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