Financial planning is like sipping a fine wine—it gets better with age. In our roaring 20s, YOLO ruled the day, while marriage, buying a house, kids’ education, and retirement planning felt lightyears away.
While stashing cash in your savings account can offer some security, those low-interest rates won’t cut it for long-term goals. Inflation can nibble away at our buying power, which is where investing comes in with its potential for grand returns, though not without a pinch of risk.
So, why do we hesitate to jump on the investing bandwagon? Is it because it’s like starting a new workout routine—daunting and sweat-inducing? Plus, who remembers anything about finances in school? Not a lot of us, that’s for certain.
Whether sipping cocktails on a beach or eyeing that rocking chair, the best time to start is now. Early birds get the financial worm, and building saving habits early lets your money work its magic.
Age is just a number: Why you should start financial planning early
In a nutshell, financial planning is all about taking a good hard look at your finances (and yourself) and crafting a step-by-step plan to reach your goals.
Here’s why you should start now.
1. Get clear on your goals and manage your risk
Starting with a goal helps you figure out where and how to invest, how much time you’ve got, and what you need to make it all happen. When it comes to investing, having goals can be a lifesaver, especially for those who find the idea of investing a bit nerve-wracking. With so many options and the ever-changing market, it’s understandable for new investors to feel overwhelmed.
Financial planning isn’t all about budgeting and living like a hermit. It’s more about finding the perfect balance between your current needs and your future dreams. It’s about using smart strategies and setting achievable goals that light a fire under your motivation.
2. Your wealth compounds earlier and for longer
Understanding financial literacy is key to managing your money wisely, and it’s more straightforward than you might think. Think of it as a smart approach to handling your cash, making it work for you and grow over time.
A lot of people get into investing because they dream of that sweet passive income – money rolling in without them lifting a finger. And who wouldn’t want that? While passive income is great, reinvesting your earnings can set you up for some serious wealth-building.
Passive income occurs when your investments generate earnings without you needing to sell them. It could come from dividends on stocks or payments from bonds. However, when you choose to reinvest those earnings instead of spending them, you unlock the power of compounding.
Compounding works by earning money on your original investment and then earning even more on the money you previously made. It’s like a snowball effect, gaining momentum over time.
For example, let’s say you invest $10,000 in stocks, and it grows by 10% each year through gains and dividends. Instead of taking the $1,000 profit from the first year, you keep it invested. By the end of year one, you’ll have $11,000. It may not seem like a huge difference, but if you continue reinvesting your 10% gains year after year, your money can grow exponentially.
Eventually, this compounding effect can turn your initial investment into hundreds of thousands of dollars over time.
3. You have peace of mind with your finances
Money plays a huge role in how we see ourselves and our place in the world. Our financial experiences and perceptions are closely tied to our self-worth, confidence, and sense of personal power. It’s no wonder that money can have such a big impact on our mental well-being.
On the flip side, financial planning can come to the rescue and help reduce some of that stress. With a budget and clear financial goals in place, you can make smarter decisions about your money. This, in turn, helps to ease the uncertainty and anxiety that often come with financial struggles.
Without a proper plan, it’s easy to lose track of where our money is going. We might end up overspending on smashed avocado on toast or not allocating our funds wisely, which can lead to even more stress. But with a financial plan, we get to prioritise our expenses and direct our money towards the things that truly matter to us. Having a solid financial plan gives us a sense of control over our money.
Remember, having a financial plan is not just about dollars and cents; it’s about taking charge of our financial well-being and finding some much-needed peace of mind.
3 ways financial advisers can help you in financial planning
You don’t have to do everything by yourself; in fact, we recommend that you do your financial planning with the help of professional advisers.
Here’s how a financial adviser can guide you in your financial journey.
1. A financial adviser can help you establish your goals
Financial planning is like meticulously organising a holiday. Just as you have a clear starting point, destination, duration, and budget for your trip, the same principles apply to your finances. Without defined goals, your financial journey could veer off course, leaving you in a bit of a pickle.
There are two things to keep in mind when setting goals: your tolerance for risk and your time horizon. Our Wealth Partners will help you find that sweet spot where you’re comfortable taking risks, and we’ll make sure your investment time frame lines up with your goals.
Break down those goals into short, medium, and long-term objectives, like a weekend getaway, a house deposit, and of course, that dreamy retirement. But before you get too excited, remember to prioritise those goals. Don’t let your trip to Europe steal your focus away from saving for your kid to go to uni. It’s all about finding the right balance and keeping your long-term dreams alive.
And finally, create an action plan to reach each goal and set timelines for yourself. Stick that plan somewhere visible, so it keeps you on track and motivated. Cooee Wealth Partners will be there every step of the way, keeping an eye on your investment progress and, if needed, adjusting your goals and strategies.
2. A financial adviser can develop effective strategies
Regardless of your current financial status, seeking advice from a financial adviser is a smart move.
Think of a financial adviser as your personal money guru. We’ll match you with strategies that fit your unique financial situation, covering your income, expenses, and risk tolerance.
With a financial adviser, you’ll get a tailored roadmap for both short-term and long-term financial goals. We’ll help you navigate the complex world of investments, offering valuable support and clarity.
But even if you’re a financial whiz, staying on track can be tough. A financial adviser provides that extra push, keeping you accountable and suggesting adjustments to maximise your dollar’s potential.
3. A financial adviser can provide coaching to set healthy cash flow habits
In the financial advisory field, our true value lies in managing client behaviour and keeping them focused on their long-term goals, even amidst changing short-term objectives.
The market can be a wild roller coaster and can make even the bravest of investors second-guess themselves, leading to impulsive decisions like selling investments at the drop of a hat during minor market dips. Financial advisers swoop in during these uneasy times, making sure clients stick to their well-thought-out plans.
It’s not just the market that plays tricks on our minds. Investors often fall into mental traps like overconfidence, thinking they can outsmart everyone else. They get all starry-eyed with over-optimism, thinking gains will rain from the heavens while underestimating risks. And let’s not forget about confirmatory bias, where we only listen to ideas that match our preconceived notions.
During such moments, advisers can step in to offer a steadying hand in a calm and rational state and help clients stick to their well-considered investment plans, even when emotions are pulling them in every direction.
The financial planning process (as done by Cooee Wealth Partners)
At Cooee Wealth Partners, we’ve got your back when it comes to investing—no guesswork involved! Our team of expert financial guides is here to chat with you, really getting to know your dreams and how much risk you’re comfortable with. Together, we’ll cook up a customised investment plan that suits you to a T.
Let’s break it down into simple steps:
- Set goals: We’ll help you figure out what you want to achieve financially, whether it’s buying that dream home or retiring in style.
- Identify risk tolerance and understand the current position: Don’t worry; we won’t use any fancy jargon. We’ll just figure out how much risk you’re comfy with and look at where you stand financially right now.
- Forecast outcome of maintaining the current strategy: We’ll show you what could happen if you keep doing what you’re doing with your money.
- Model outcome of implementing suitable strategies: We’ll whip up different ideas and show you how they could work for you.
- Provide a comprehensive financial plan and explain the strategy: We’ll give you a straightforward plan that makes sense to you.
- Implement and review: Once we’ve got your plan in place, we’ll keep an eye on things, making adjustments as needed.
Starting early is crucial for investing and unlocking the power of compounding to achieve long-term financial goals. Cooee Wealth Partners can guide you in setting achievable objectives, tailoring smart strategies, and providing support during market fluctuations. By taking charge of your finances and making informed decisions, you gain peace of mind and reduce financial stress. As your financial support person, we’ve got plenty of tricks up our sleeves to guide you through various investment options.
Are you ready to make your financial goals a reality? Contact one of our wealth partners and we will start the financial planning process with you.