“Good fortune is what happens when opportunity meets planning”Thomas Edison
So, you’ve got a financial goal in mind, but you don’t quite have the road map to get you safely and successfully to your destination.
Just take a step back and think for a minute. We usually plan when we go on holidays, right? Choosing your destination is just the beginning, then slowly but surely the plan to get there is developed based on a number of important factors like our budget and the time we have to indulge in said holiday.
Ok, so financial planning is probably a good place to start on your journey to wealth creation too, don’t you think? Don’t be drawn into the myth that financial planning is just for those who are already cashed up. It’s also a great asset for those who want to achieve financial goals – whether they be in the short or long term – so you can be the master of where your money goes, rather than wondering where it all went down the track!
Wealth Creation – What is it?
Firstly, let’s look at the concept of wealth creation and making your money work for you, rather than the other way around.
Wealth creation is a process one undertakes to create a consortium of assets – stock, bonds, property, gold or old-fashioned cash. This pool of assets and investments is put in place to be able to generate a source of income for its owner and potentially lead to significant wealth creation. Well, that’s the plan anyway!
If that is in case the plan, really the goal, then it would be safe to say that some proper financial planning wouldn’t go astray to help execute the plan to reach the goal. Still with us?
Financial planning alone isn’t wealth creation. Financial planning can include the process of investment management with the outcome of creating wealth. So, do you need one to get to the other? Let’s just say or let Warren Buffet say it for us, “Failing to plan is planning to fail”. And he should know!
Why financial planning is so important to wealth creation
If you’re looking to embark on your wealth creation journey, every financial planner will tell you that creating a budget is your first port of call. Next, invest rather than just save and cut down on unnecessary expenses to create a debt-free slate from which to begin building your wealth in earnest.
Here are three financial planning points to consider when consulting with a professional about your own journey to creating wealth…
1. Getting back in the black
Goal-based planning allows for a proper strategy to be put in place to ensure your money is kept in good check and gives you an insight into your income and outgoings. This enables you to devise a realistic budget that will put you back in the black and on track to attain those often-elusive savings.
“Do not save what is left after spending, but spend what is left after saving.”
2. Saving for a rainy day
It’s a thing. And we all know, life happens when we least expect it or need it!
So, as part of your financial planning process, you should include an emergency fund. Aim to have up to six months’ worth of your salary available should you need it for any of life’s unexpected events which could see your income reduce significantly or worse.
Paying bills is a fact of life. Disciplined savings will ensure you literally always have money in the bank to support your current lifestyle while helping you to achieve your long-term goals.
“Money is a guarantee that we may have what we want in the future. Though we need nothing at the moment it ensures the possibility of satisfying a new desire when it arises.”
3. Paving the path to financial independence
A proper budget, developing an investment plan and planning for your retirement are all vital steps to reaching financial independence. With a sound financial plan, your journey to wealth creation is off to a good start. It will allow you to identify the steps integral to building your wealth successfully and sustainably.
What’s the ideal wealth creation plan?
Firstly, the earlier you start the better. And you’ve effectively already started by taking steps to seek out information on financial planning.
An ideal wealth creation strategy will often include investments and superannuation but the main thing is, it puts you in control of your finances and the decisions you make. When you consult with a financial planner about your own wealth creation objectives, be sure to identify your specific goals – for example becoming free of debt, retirement planning or saving for a renovation – to enable a plan to be put in place for you which delivers outcomes for your financial future.
The ideal wealth creation plan may include (but not limited to) the following:
- Regular savings
- Salary sacrifice
- Property investment
- Share investment
- Managing your taxation
- Trust Management
- Debt Recycling
- Capital Protection.
Some experts suggest that financial planning and wealth creation go hand in hand and that starting your wealth creation journey without a proper strategy would be impractical.
So now you know where to start. Plan, plan, plan. Consult with a trusted financial planner to get your wealth creation journey underway today.
And stay tuned for the next article in our ‘Wealth Creation Series’ which will take a deeper dive into your investment strategy and how to actually grow your wealth over time.