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A financial plan involves developing a framework within which you can work out where you are now and where you want to be in the future...

 In this video you'll learn: 

  • what a financial plan is; 
  • why you need a financial plan; and
  • why it's important to have a financial plan.



Robin Powell: Hello there. The primary role of a financial adviser is not to recommend an investment portfolio. It’s to produce a financial plan, to adjust that plan as required over the years, and most of all, to make sure that you stick to it. Jason Butler is a former adviser who now writes and speaks about financial planning. He says there are three main risks involved in not having a plan.

Jason Butler: One, you may not actually get to where you want to go because you haven’t articulated, you won’t know what success is because you haven’t articulated it. Secondly, you are highly likely to make less what we call sub-optimal decisions, which means bad decisions, decisions that aren’t as good as they could be. And thirdly, and this is probably I think the biggest thing is that you may be for 30/40 years carrying around a hell of a lot of anxiety, worry, stress, and beating yourself up mentally that you should be doing better with your money.

Robin Powell: So, what exactly is a financial plan? And what purpose does it serve?

Jason Butler: A financial plan is really developing a framework within which you can work out where you are now, where you want to be in the future, and making a decision or a series of decisions about what it is you should be doing to get nearer to that goal. Now, in the early part of your lifetime then it’s going to be decisions about developing your career, your earnings potential, things like accommodation, where you’re going to live, and relationships, and possibly family, building businesses… But as you get older, obviously it becomes more about living off your money and becoming financially independent when you can’t or don’t want to work. And then in latter years, it’s about making sure you have the right kind of lifestyle in your latter years that you really want, and making sure that you’re secure and not a burden on anyone and that you can lead the legacies that you want.

Robin Powell: But even more important than the plan itself is the on-going planning process. If you like, it’s not the flight plan but the course corrections that really count.

Jason Butler: I liken it to a supertanker. If you are the captain of a supertanker, supertankers cannot turn like a speedboat. So, therefore, if you know there’s going to be an island appearing right in front of you in 10 miles time, you need to make some sort of course corrections well before that happens. Because otherwise you’re going to run aground, and you’ve got this great big boat stuck in the middle of nowhere.

Robin Powell: Thanks to Jason Butler, and to you for watching. Goodbye.

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