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Home / Plan your retirement / Financial advice / Independent financial advice / The value of clarity: Planning your long term future

The value of clarity: Planning your long term future

June 18, 2019 by Daniel Brammall Leave a Comment

Reading time: 4 minutes

Planning your future means making the decision not to let Lady Luck call the shots. Financial planning exists so you can actually experience the future you want to have. Clarity on what you want that future to look like is a pre-requisite.

But day-to-day life is noisy and obscures the action items we must attend to, to ensure we are moving in the right direction and at the right pace.

Lacking a shared, crystal clear picture of your future

Your average 40-something couple has a dream about work being optional one day but they don’t know where the goalpost sits: they don’t have a crystal clear picture of what their future net worth needs to look like in 240 months’ time to actually make work optional.

Your average retiree couple has spent a whole career amassing a nest egg that they now draw on for their lifestyle but they are still anxious about an uncertain future. There is a constellation of possible future economic scenarios, what’s unclear to this couple is a crystal clear understanding of how long that money is likely to last them.

No clear plan

Lacking any real clarity about their future, they can’t develop a solid plan – a list of all the action items they need to take so their desired future has a higher probability of actually happening. Attempts they make at planning are novice and unsatisfying, decisions remain unmade and time slips by because of the noise and pressures of day-to-day life.

Without a focussed agenda they are subject to the sales pitches of those who do. They are rocked this way and that by the manic economic noise the media peddles. Distracted, uncertain, and lacking direction, over time they get used to carrying this low level but omnipresent feeling of anxiety that – left unchecked – will start them losing sleep.


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Exercises to get you out of trouble

Clarity is the salve and, although it’s achievable by a methodical process of introspection, it’s more successfully accomplished when done as a facilitated exercise by someone you can trust. Even better by an independent and experienced practitioner.

But that’s step one: get clear on your end game. What are you trying to achieve here – in explicit detail, furnished with all your reasons why it’s important. This brings a sense of direction and purpose, and with that, a higher likelihood you’ll do what’s necessary to get you there.

Now it’s number crunching time, and here’s where the stakes of doing it yourself increase …

There are myriad online tools that promise to tell you how much money you need to have amassed to achieve certain financial outcomes. They work like this:

  1. Amount of starting capital, plus …
  2. Amount of regular contribution, earning …
  3. Average annual return, means …
  4. A final result.

It looks something like this:

Looks like a nice, predictable climb up, followed by a very neat slippery-dip down to a predictable end.

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But as we all know, the real ride is more like a roller coaster, with far more bumps than what the above foretells. The journey in reality is laden with unforeseen global events, market and economic downturns and missed opportunities – the past doesn’t look anything like this.

The future is unknown, and at any given moment it could go either way.It looks more like this:

Consulting a genuinely independent financial adviser provides several benefits …

  • In the first instance, a facilitator who helps you get crystal clear on what you need to accomplish financially, on how your situation needs to look to support that future.
  • Next, to help you establish the plan – a list of action items. This breaks down long term goals into simple, actionable tasks that you can enter into your calendar and tick off in much the same way you would if you were planning to host a party.
  • Next, to help you track your progress towards that end game. Are you on track? Are you off track? Does it matter? If it does, what’s within your control and what can you ignore? Not only does this give you an unambiguous understanding of your progress against your plan, it also delivers a point of accountability on the tasks that are the backbone of your plan.
  • ‘What-if’ troubleshooting. Looking down the road, what if something beyond your control impacts your plan? How sensitive are the outcomes to events beyond your control, like a string of poor investment returns or even a global market collapse? A ‘Monte Carlo’ exercise shows you this; it’s runs thousands of computer-generated possible scenarios – from the entirely likely to the extremely unlikely – so you can appraise the likely longevity of your capital. You repeat the exercise annually, incorporating the previous year’s actual experience into the new forecast, and then go back to your daily life.

Who’s got your back?

You meet with your adviser periodically through the year to check your progress against the plan, the whole plan not just market returns, and you decide whether anything different needs to be done, and follow through on the decisions.

Having a relationship like this with someone you can trust gives you direction and confidence. Someone who can bring calm objectivity to your noisy subjectivity, context to your content, and can help you peel back the distractions of life so you can think your way through the minefield and make good decisions about your money.

This frees you up to go back to your busy world but with a feeling of peace, rather than a sense of anxiety.

For more information on the Gold Standard of IndependenceTM or finding an adviser who practises it, go to www.pifa.org.au, the website of the Profession of Independent Financial Advisers.

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Disclosure: SuperGuide is a Corporate Authorised Representative of Independent Financial Advisers Australia. Daniel Brammall is a Director of both Independent Financial Advisers Australia and the Profession of Independent Financial Advisers (PIFA).

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All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs.

You should consider whether any information on SuperGuide is appropriate to you before acting on it.

If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions.

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