10
April
2017

Balancing Competing Priorities

Identifying what is most important to you

Financial planning involves the balancing of a number of priorities, making trade-offs and compromises, much like life. Often in order to gain something, we have to give something. The art of financial planning is finding the appropriate mid-point for the individual by identifying what is most important to them.

When it comes to investing money, there is the risk/reward trade off. In simple terms growth assets such as shares and property have far more potential for growth than defensive assets such as cash and bonds. However growth assets are also far more volatile and offer much less certainty in regards to returns.

Each individual will be comfortable with a different level of risk, and has a different requirement for growth; we need to find the right balance.

Arguably the biggest balancing act we face in financial planning is weighing up meeting goals for our current lifestyle versus preparing for the future.  Achieving long term goals such as buying a house or having a comfortable retirement usually come as a result of making compromises to ongoing lifestyle or foregoing short term goals.

Unfortunately many people don’t adequately prepare for the future and are unable to achieve their long term goals. This may be conscious choice to live for the now, and allocate their income and assets to having a wonderfully rich life and they are prepared to live more frugally in the future. This is a perfectly reasonable trade off. Others just don’t consider the future and are maybe a little wasteful in the now. This can be problematic.

Others do the opposite, and are ultra-concerned about setting up their future. These people are very diligent in ensuring that they are putting money away for their long term goals and wealth creation. This is wise, however there is always a risk of over committing, it is becoming more common for people to acquire far more wealth than they will need in retirement. This is itself is not a problem, however if they have foregone lifestyle in order to achieve this wealth this is potentially a problem. Again the key is balance.

There are so many more of these trade-offs. In retirement we compare the Centrelink friendly guaranteed income of the Life Long annuity against the flexibility and liquidity of the allocated pension. We compare the tax advantages of Superannuation against the loss of access to those funds until we retire or meet a condition of release. We choose between repaying our mortgage or investing our surplus funds.

All of these options are valid and have their own advantages and disadvantages. The key to a successful financial plan is making sure that you select strategies that prioritise what is most important to you.

 

 

 

Author; Alex McKenzie Categories: Future Financial Services Blog

About the Author

Alex McKenzie

Alex McKenzie

Owner at Future Financial Services

Past:

  • Paraplanner at Zammit Partners Investments
  • Unit Trust Administrator at Colonial First State

Education

  • University of Western Sydney
  • Penrith High

About

As a Financial Planner I help people to achieve what they would like in life. This involves helping you to identify the things in life they would like , developing plans to help achieve them and strategies to protect what you already have. We do this by providing Financial Advice to guide you through your life stages.

The financial planning process involves determining a clients current situation and financial objectives and tailoring strategies to assist in best achieving those objectives.

I am an expert in superannuation, investments and insurance, these are tools we use to help you achieve your goals.

I aim to use my knowledge of superannuation, taxation and Centrelink to efficiently use your assets and income to achieve your financial goals.

Retirement and pre-retirement planning, wealth creation, asset protection, insurance planning and estate planning are all areas of advice that I provide.

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