After looking at the basics of getting started with money (Millennial Finance) and then how to build wealth (New Accumulators), it seemed logical to move on from that, to what I’m terming Planning with Purpose.
What does that mean? Well, it’s about the long middle; the period of time in life when you’re well established, used to investing and building for the future. There are things to address in this season of life that don’t apply to those that are earlier in their journey, or those for whom retirement or financial independence, is in sight.
I think it’s worth establishing right at the outset exactly what financial planning is. It’s a question I get asked a lot, and I find that, as with any area of personal finance, there’s a lot of misunderstanding around it. To be clear, it is NOT the same as financial advice – if it was, you wouldn’t be able to do it on your own!
As you go through the coming blogs, we’ll look a bit more at what planning is, and then move into the practicalities: the methodology of planning, the timeline paradigm, assumptions you should use and so on.
A key part of this series is understanding how and why you should be setting financial goals, whether they’re clearly defined or a bit vague and woolly. I want to help you to clarify your goals as far as is possible, and show you how to base your planning around them, including how to adjust for things like inflation when we’re working on goals which are a long time in the future.
Then, I’ll help you move from goals to action, and show you why you need to work backwards from your desired outcomes to establish what needs to be done right now in order for you to move towards that. We’ll then apply what we’ve covered in the first few chapters to produce a document which summarises both the long-term goals and the here-and-now actions required to meet them.
It’s a document designed to be reviewed regularly and to be kept close by, to help us stay on track. There’s power in having a tangible, written-down record of your goals and actions, and I think you’ll agree once you’ve created your own one-page financial plan.
You’ll also need a strategy to help you stay on track, which means you need to implement a regular review programme. You’ll find the key components of any financial review, taking in goals, progress towards them, investment performance review and a bit more besides.
Folks in the Planning with Purpose phase of life are generally well-established in their investing and saving routines, and are often looking at ways to boost things along, and accelerate their progress towards their goals.
To help you with that, we’ll look at simple hacks you can use to do this, from automating savings increases to maximising tax reliefs, to considering alternative investment approaches and wrappers, away from the basic pension and ISA stalwarts. We’ll also explore how you can use other people’s money to accelerate your way to financial freedom – leverage.
Next, we’ll look more at diversification – spreading your money around to obtain exposure to different markets and different providers and different tax wrappers, and how you might want to take that up a level.
I’ve also included a post on behavioural finance for experienced investors. I talk about this a lot on my podcast and in my books, because nobody is immune to even the basic behavioural biases and behaviours. In season 15 of the MeaningfulMoney podcast, which this blog series is based on, I spoke to Neil Bage of Be-IQ. He shared so much helpful information that I’ve included an edited transcript of our conversation later.
Next, you’ll learn how to weather-proof your portfolio, how to plan for the unexpected and deal with setbacks, as well as how to cope emotionally if something goes wrong. There are also some excerpts from my interview from The Escape Artist, Barney Whiter, about how to stay the course on your journey to financial independence. I’ve finished off with some advice of my own, and the answers to the questions people asked me as I went through season 15, which I hope will be useful for you too.