End of Year Financial Reflections
Ok, another year is nearing its conclusion. How did that happen? Where did the year go, is it just me of is time passing by faster and faster each year?
Anyway, as the year ends, it’s a time for some reflection and often that reflection morphs into New Year’s resolutions.
The following list is a collection of thoughts, questions and reflections to help you think about your finances and financial wellbeing as we wrap up 2015:
Did you make financial progress this year?
What does that means? How are you going to measure it?
• How has your net worth changed in last 12 months (do you keep track and are you honest/conservative with the numbers?)
• How has you income changed and is it going in the right direction?
• How have your debts changed? What were they at the beginning of the year, what are they now?
• How has your super balance improved?
You need to be careful not to conflate the tracking of your financial numbers with short-termism. It is human nature to feel concerned when asset prices are heading south.
Risk on or off?
In an inflationary environment, your capital needs to go out to play, and in that playground there is risk.
In a deflationary environment, where things get cheaper with time, all you need to do to increase your buying power is to put your money in the bank and wait for prices to fall in value (just ask the Japanese). But when things (assets, goods and services) are constantly going up in price, then your capital needs to leave the safety of “home”, or a riskless environment. The question for most people is not whether to take risk or not, but how much risk and what the nature of that risk is.
So, where are you on the scale?
• Too much, or too little?
• Can you psychologically withstand the possible downside?
• Can your personal wealth withstand the downside?
• Do you have buffers and strategies in place to manage the risk?
Gap between knowing and doing
We know more than we have ever known.
Google is now a verb (apparently so is “to dyson”). There is more information available to us than at any other time in human history, but, and this is a big but, we are being overwhelmed. We are drinking from the fire hose. We are drowning with information and as a consequence we are being overloaded.
The two main problems of this very modern day dynamic are:
• Analysis paralysis. There is simply too much to analyse, especially if you do not know what not to waste time on.
• How to weigh things. With so much to consider, how do you balance out competing ideas. Where do you sit on the continuum between two good but competing ideas? Most people are not good at this type of decision making.
All of this leads to inaction. Inaction plus the passing of time equals unrealised visons, goals and objectives.
We need to narrow the gap between knowing and doing.
No professional is better at doing this than a financial adviser.
Designing, setting and adhering to long term strategy
You cannot adhere to something that doesn’t exist. You cannot adapt and change something that never existed in the first place.
Everyone needs a considered, designed and well-articulated long term strategy. And once in place, and in the absence of good reasons to change strategy, should be adhered to, even as the world around changes and pulls and pushes us in different directions.
So, do you have a plan? Will you have a plan?
Frank Paul is Chief Operating Officer & Head of Advice Services with Spring Financial Group. Frank has over 20 years' experience in financial planning and investment advisory.
|Frank has extensive experience in private client advising and the management of financial services operations. Frank is actively involved in the recruitment and management of advisory personnel and heads the advisory panel. He holds a Master of Commerce (Financial Planning) and a Dip. Financial Planning and has authored literally dozens of financial education publications.|