The financial plan and the album

The financial plan and the album

Photo by Lee Campbell on Unsplash

I often get asked – ‘What is a financial plan?’, ‘What do you mean by a financial plan?’ and ‘Why should I have one?’

It is easier to say what a financial plan is not, than what it is.  It is not a pension recommendation, an investment portfolio or a technical report on your estate planning.

A financial plan is an analysis based on your goals and how to achieve them given your current and future assets, your earning potential, your liabilities and reasonable assumptions about the future.

It should allow you to consider all the aspects of your financial planning in the context of what you are trying to achieve in life, and what return you need to achieve your goals.

Try thinking of a financial plan like a new album from one of your favourite recording artists.  The Oxford English Dictionary defines an album as “a collection of recordings issued as a single item on CD, record, or another medium”.  It can then be enjoyed over and over again.

A financial plan is a collection of assumptions and facts based on what the planner knows about you and what you want to achieve in your life, which can then be implemented and reviewed over time.

Imagine this scenario … you’re listening to the radio or a streaming service and you hear a new song, you think sounds good.  You probably wait until you’ve heard another track by the artist before doing anything else, but when you do (and if you think this one’s good as well) you might download or buy the artist’s album.

This is similar to taking the plunge and having an initial meeting with a financial planner and agreeing to have a financial plan created for you.  Initially you might approach a financial planner because there is something, a ‘pain point’, that makes you pick up the phone, or more likely the mouse, and book an appointment.  This might be a desire to save more, you might have funds to invest, need help with your existing pensions or a combination of things.

Having received your album you listen to it a few times and like most of the tracks, however it’s likely you’ll like the original songs you heard (the ones that convinced you to buy the album in the first place) the best.  Just like a financial plan you’ll appreciate the fact that it provides a holistic review of your chances of achieving your goals, but initially you’ll be more concerned with the fact that your concerns have been addressed and/or progress made.

However, over time as you keep listening to the album, and as you go away and come back to it, you start to appreciate it more.  Especially if the artist has put thought into the album’s flow, which used to be the case with most albums (particularly if you needed to turn them over) but that’s a whole different blog!

A financial plan is very similar, you’ll keep coming back to it for another review (listen) and over time understand and appreciate how much it gives you the peace of mind that you are on track to achieve your goals.

Eventually you grow to love the whole album and always enjoy listening to it and the same can be true of a properly thought out financial plan that is based on you and your goals.