Articles
WINNING GOALS
by Denise Cullen
This article was published in the Financial Planning section
of the Sydney Morning Herald on Wednesday 22 March 2000
http://www.tradingroom.com.au
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A sea change is washing over the financial planning industry and
turning the traditional client advisory model on its head. Instead of focusing
on strategies to help clients salvage a proportion of each pay packet - then harnessing
this cash to secure superior investment returns - financial planning groups such
as IPAC Securities are increasingly assuming the broader role of lifestyle strategists
to their clients.
"Outcomes of an investment strategy continue to be expressed in
simple monetary terms," agrees Ian Hutchinson of consulting firm Life by Design®.
"But is that important to clients? Probably not. What is important is how financial
advise can change the lives of clients and how good advice can deliver a desired
lifestyle that makes them feel uniquely successful and happy in life."
The bottom line in: if you're still setting aside 10% of your
income and then trying to figure out what this will allow you to do in life, you
haven't grabbed the bull by the horns - you've seized the rear end of the beast
and are probably in line for a kick.
The new approach to financial planning, Hutchinson says, is to
think creatively about what sort of lifestyle you want and then map out the rest
of your existence, including your finances, around that. The key to making it
work is to set clear goals.
Personal-finance author and columnist Noel Whittaker says this
is critical to wealth creation. "Most people wish for far more than they will
ever need, but because of an inability to set realistic goals, end up with far
less than they could have attained," he says.
So, how does this work in practice? Follow our step-by-step guide
for some pointers.
- Know Thyself
Hutchinson advocates self-knowledge as a useful starting point as runs programs
aimed at helping people tease out what they really want in a range of areas such
as health, intellectual growth and relationships. "A lot of people don't; know
what personality type is," he says. Yet understanding this can be crucial to successful,
long-term planning. Selling up and retiring to the country might suit an introvert,
for example, but an extrovert could quickly discover rosy dreams of rural existence
don't match the reality.
- Decide what you want
Most people know what they don't want in their lives but have great trouble
working out what they do want, Hutchinson says. So how do you swap traffic jams
and financial crises for work-from-home arrangements and a stress-saving emergency
cash fund? By positively defining your goals. It's not enough to frame them in
general terms such as "I want to be rich". Whittaker says goals need to be clearly
defined. For example, "I want to retire at 55 on an income of $75,000."
- Take a reality check
Review what has emerges from steps 1 and 2 and be sure the results tally. Consider
whether your goals are realistic and believable. "Someone who's retired can't
come along with [a lump some of] $200,000 and want to live on $50,000 a year,"
says the director of Millennium Financial Services, Marisa Broome. However, she
points out that younger people with the appropriate time and means may consider
this a reasonable goal.
- Do the sums
It's all very well to fantasize about your beach-front apartment in Noosa
and your swag of share investments but somewhere along the line you'll have to
pay for it all. Writing a detailed plan is therefore crucial. Less than 3% of
population has a budget for an ideal lifestyle and the cash flow to go with it,
Hutchinson says, "so many think, 'I can't make a change in my lifestyle because
I can't afford it'".
But the outcome of this number-crunching exercise might be a pleasant surprise.
"If your lifestyle costs $60,000, you might ask 'Why do I need to work my guts
out to earn $120,000?'" says Hutchinson.
- Consider the unexpected
Many of life's events can throw your plans out of whack. Consider what would
happen if your partner took a year's parental leave to care for a new baby, or
if you faced a long period of illness, for instance. The deputy managing director
of Count Wealth Accountants, Kylie Lambert, suggests creating a "peace-of-mind
wealth pool". "This is money that is easily accessible for emergencies and short-term
goals. Ideally, it should be 2-6 months of your salary."
- Break big goals into small steps
Fleshing out a larger goal through a series of smaller steps can help you
maintain enthusiasm and momentum when the ultimate prize lingers a frustrating
five years away. "Start with the end goal first and work backwards," Whittaker
says. For example, your immediate goal might be to pay off your credit card. When
that is done, the money you were diverting for this purpose can be used to grow
a home deposit.
-
Write them down
To move your goals beyond the realm of daydream, commit them to paper. "Write
your goals down," Whittaker says. "Written goals are far more powerful than spoken
ones."
- Tantalize yourself
Visualise your goals in detail and imagine the benefits financial discipline
will ultimately bring. Just as some dieters stick photos of Elle Macpherson to
the fridge, plastering your wall with pictures of your dream home can help maintain
focus when you are tempted to blow that hard-earned nest egg on a rash of restaurant
meals or an overseas holiday. Broome notes that seeing the zeros multiply has
been satisfying enough to spur many of her clients on to even greater savings
feats.
- Taste the rewards
Lambert says you are more likely to achieve success if you reward yourself at
the achievement of each goal. "It could be as simple as stopping to mentally acknowledge
your achievement and giving yourself a mental pat on the back or buying yourself
something you have wanted for a long time," she says.
- Just do it
"Starting is always the hardest thing," Whittaker says. "In goal-setting it
pays to start small and build up some confidence with little successes. Once you
do this, the excitement of accomplishing the little things will lead you onto
the harder tasks."
For more information, Tanya Mottl may be contacted by
phone (+ 612) 9979 4949, fax (+ 612) 9979 4969,
or email info@lifebydesign.com.au
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