Like eating less and exercising more, taking charge of one’s financial affairs is usually top of the list when it comes to new year’s resolutions. However, as with all good intentions, us humans are hard-wired to spend most of January finding seemingly valid excuses for abandoning our goals rather than attacking our resolutions with determined gusto. Not having the time is never a good excuse for deserting any well-intentioned goal. Simply put, if you don’t have time to organise your financial affairs then you’d better make time for fiscal confusion. Although the obvious first step in setting your financial affairs in order is consulting with a certified financial planner®, it appears that many people shy away from taking this step – not as a result of empty excuses, but for a number of valid fears concerning when to seek financial advice. In our experience as financial planners, these are the top five deterrents when it comes to seeking financial advice:
1. You don’t earn enough money
A common misperception is that one needs to earn a large amount of money and have a substantial asset base before it warrants retaining the services of a financial planner. Ironically, the converse is true. The best time to seek financial advice is as soon as one starts earning an income. The earlier you start working towards your lifestyle goals, the longer you have to invest and the greater your opportunities to reach your goals. The words of the recent Allan Gray advert featuring deceased actor James Dean speak right to the heart of the matter. “Given time, imagine the possibilities”.
2. You’re going to get sold something
Given the history of the financial services industry, this is not an invalid fear. If you seek financial advice from an advisor who is not independent (i.e. is linked to one insurance house) and who does not hold a Certified Financial Planning® certificate, then it is entirely likely that you will be sold a life policy, retirement annuity, education endowment or some other commission-based product. On the other hand, a Certified Financial Planner®, who operates as an independent practitioner and charges fees for his services (as opposed to earning commission on products), will provide you with a written financial plan – meaning the only thing you will be ‘sold’ is sound, independent financial advice.
3. It’s never going to happen to you
While you are working, your greatest asset is your ability to generate an income. And although it is idyllic to believe that disease, disability and life-altering accidents are disasters that visit others only, the truth is that your earning potential can be obliterated in one fateful instant. Protecting your income through cost-effective and appropriate insurance is one of the most valuable financial planning tools you can implement while you are still young and healthy. Although we don’t condone fear-based selling of insurance products, we do believe that a rational “what if” scenario planning exercise should be undertaken together with your financial planner. A Certified Financial Planner® will be able to calculate the exact amount of income protection you need, and will be able to source the most affordable option for you.
4. Retirement is too far away to worry about now
It goes without saying that the last thing on anyone’s mind when they first embark on their career is retirement. When a person first starts working they generally have a multitude of financial goals that they want to achieve – vehicles, marriage, homes, travel and further education to name just a few. Funding for retirement is generally not a priority when you receive your first pay check. The reality, however, is that if you start working at age 25 and plan to retire at age 65, you only have 480 pay cheques to fund for your retirement. Every year that you delay funding for retirement, you need to spend a greater proportion of each month’s salary to catch up your retirement shortfall. Don’t delay. Start investing today.
5. You won’t understand it
A good financial planner should be able to summarise your financial plan in one page and in a language than you completely understand. Further, a good financial plan should address three major areas of your portfolio. Firstly, the plan should recommend appropriate risk cover solutions that you may require to protect yourself in the event of death, disability or disease. Secondly, the plan should analyse your investment needs and show you how to achieve your retirement and other investments goals (such as your children’s education or funding for a new home). Lastly, your financial plan should advise you how to structure your Will and do your estate planning effectively. If you are struggling with debt, your financial advisor should also present you with a debt reduction plan as well as sound budgeting advice. The bottom line is that, if you don’t understand your financial plan, your advisor has failed to do his job.
Don’t allow your decision to take charge of your financial affairs become one more failed new year’s resolution. Seek advice from the experts. Take ownership of your fiscal future and enjoy the benefits of a personal financial revolution.
Have a blessed weekend!