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I MAKE no excuse for being passionate about financial planning. After all, this has been my life for the past 44 years.
Like many who offer advice on specialist subjects, I sometimes wonder how much cognisance my audience take of what I advocate in my articles, on radio and on TV - and how they implement it in their own financial picture.
I have always maintained that the starting point for anyone planning their financial future is to sit with a competent financial planner and complete a thorough financial analysis. This should be reviewed annually as circumstances are ever-changing. I recommend you keep an eye on your risk profile and adapt it as required, especially when approaching your retirement years.
Let me give you a typical example by using a person who has a family and who lives a comfortable life as a result of hard work, dedication and diligence. After a full Financial Needs Analysis with this individual, it was determined that the risk profile should be growth orientated.
Accordingly, the person has built a personal portfolio over the years and it appears to be working well. Everything looks as if it is on track to achieve the desired long-term financial goals.
Then one Saturday morning, a couple of weeks before their annual holiday, this family is strolling around a new car showroom next to the car wash. They take their time ogling the latest models. The adrenalin starts to pump and suddenly an 'indiscrete' decision is taken. This decision included using cash saved for the impending holiday as the deposit on the new vehicle, with the readily-available excuse that the credit card would pay for the holiday! During that brief moment, the predetermined financial plan has been disregarded entirely, irrevocably changing the financial strategy.
Experience proves that what follows is "buyer's remorse" and the need arises for a complete reassessment of the financial plan. Such a plan is urgently required to ensure that long-term financial planning is not jeopardised to the detriment of your hard-earned peace of mind.
I'm sure many of you can identify with the character depicted in my story.
Life has a way of testing us somehow! For the most part, we remain disciplined in our spending approach, keeping our eyes on the goalpost, but it is only human to occasionally succumb to temptation! This is when we upset the balance and allow financial risk to increase disproportionately to our original plan.
Think about your own situation. How much risk are you exposed to at present with recent falls and subsequent rises in the equity market? Accepting that everyone takes risks, you must agree that it would be foolhardy not to monitor the degree of risk to which you are currently exposed and to remain firm, not permitting the odd "hazy" moments to cloud your long-term vision. The solution may simply be to regular monitoring of how you are doing but, it may also necessitate calling upon a specialist to clearly identify the needs and to add value by structuring a real solution.
My parting advice for 2009 is whatever you do, keep your focus. Do not deviate from your original long-term financial plan.
I wish the readers well over the festive season and will be back with you in mid January 2010.
l The writer is a director of Bryan Hirsch Colley