If you can’t answer these questions, you don’t have a financial plan!


Andrew Zbik

Apparently eight out 10 Australians don’t get any formal financial advice. Earlier this year ASIC found that while 44 per cent of Australians said they have a short-term financial plan only 23 per cent said they had a long-term financial plan.

Would you run a business with no business plan, budget or tracking your revenue and expenses? Do elite athletes train sporadically to qualify for the Olympics? In your day job do you rock up and do what you feel like with no direction or Key Performance Indicators (KPI’s)? The answer is likely to be no.

I believe most Australians live on what I call “Hope-ium.” When it comes to managing personal finances, most Australians:

Have a job

  • Know they have superannuation
  • May have a few shares and/or an investment property; and
  • Hope that this will be enough to provide them with a retirement where they can stay living in their own home, travel overseas every year and help the children.
  • If you don’t have an answer to any of the below questions, you don’t have a financial plan:

1. What is your planned retirement date?

I’m not talking about a half-hearted guesstimate of oh, say, 65ish, for example. I mean, have you set a specific date to retire by? For example, to retire by 31st December 2032. The power of setting a deadline is strong. It also links with the following questions.

2. How much income do you need to retire?

Have you been through the exercise to determine, if your mortgage was paid off and your children were grown up, what it would cost for you to live the lifestyle you desire? In addition, if you are not working what would you do with your time? Travel more, pursue a hobby, or volunteer with a charity are common ideas. Have you then worked out how much it would cost to fund those interests? I sit down with my clients and work out specific outcomes. For example, they might need $65,000 per annum to cover living expenses and a further $20,000 every two years for an international holiday. We base these numbers on today’s dollars because it is easier to understand and quantify.

3. How many assets do you need to achieve your retirement income?

If you don’t have an answer for how much income you desire in retirement, this question cannot be answered. Once you do have an income goal, we can work out the value of all the assets you need outside of your home to support that lifestyle in retirement. It’s good to know what this number is. For example, a desired retirement income of $75,000 needs $1,500,000 today outside of your family home or around $3,400,000 in fourteen years’ time adjusted for inflation.

4. How much do you spend now?

All successful organisations and individuals know where they spend their money. There are plenty of apps and programs that for a small fee each month can help to automatically track your expenditure and categorise it for you. Knowing where you spend your money will help you be wise with where you allocate your hard-earned cash. Fun and enjoyment now need to be balanced with planning for the future.

5. What do you deliberately save each month?

Do you have an amount of prioritised savings you put aside each month towards an investment plan? Let’s be clear, savings are not what cash is left over after all expenses for that month have been paid. Saving is a monthly commitment i.e. to put, say, $1,000 into an account every month, without fail.

If you don’t have an answer to one or all these questions, a one-on-one session with a Financial Planner can help you to start to work out what your goals are. Once you know what you are seeking to achieve a financial plan can then be put in place to help you work towards achieving what you want.

You will continue living in hope of winning the lotto without knowing the goals you are working towards.

By Andrew Zbik, Senior Financial Planner


You must be logged in to post or view comments.