Laying foundations

By on February 25, 2009

Photo © Elena Derevstova

As the global economy continues to flounder, now more than ever it’s a pertinent time to review professional and personal goals. Equally important is a financial plan which if achieved, will eliminate professional concerns and provide a stress-free personal life in retirement. Professional, personal and money lives are inextricably linked and are equally important for ‘thirty-somethings’ or those in the autumn of their careers.       

 

Aside from the lucky few who achieve financial independence at a sufficiently young age to enjoy their wealth, the majority devote entire working lives to achieving financial goals. For people in their thirties, wealth building and the management of wealth is essential in realizing objectives. For those in their fifties, protecting accumulated wealth is usually the priority.  

 

For younger people, wealth building is a process of identifying, implementing and monitoring financial objectives, but common mistakes can be made :- 

 

 

1. Neither establishing objectives nor implementing a plan. “People don’t plan to fail, they just fail to plan”

 

2. Consideration of two risks: Investment risk; inadequately quantifying attitude to investment risk and targeting unrealistic returns. Personal risk; Failing to insure against premature death or long term sickness.

 

3. Ignoring portfolios during adverse market conditions when it is important to adapt to changing dynamics.

 

4. Procrastination.

 

 

Many people regret delaying financial decisions, but taking steps towards financial security should not need a decision. Delaying the commencement of a retirement plan by a few years can mean that contributions would need to double to achieve the same income for later years. The chilling alternative is the postponement of retirement.   

 

For late-career individuals, wealth has usually been achieved through savings, investments and inheritance. The nest egg needs to be protected but many invest in higher risk assets such as stocks and mutual funds without paying attention to performance during volatile periods. People within 5 years of retirement should meet regularly with their financial planner to ensure that risk is minimized and wealth is protected. Some unfortunate people within touching distance of retirement were too exposed in 2008 and now face many additional working years.

 

Younger people in the early stages of wealth building should take five fundamental steps to achieving financial goals:-

 

•Identifying objectives and when they should be achieved.

•Quantify risk tolerance to identify suitable assets. 

•Check experience and qualifications if engaging a financial planner,   and the safety of the product providers being used. What is the exit strategy if needed ?    

•Develop a realistic plan and implement it without delay.  

•Monitor progress regularly.

 

For those in the wealth building phase of life, developing and managing a financial plan is vital once they have swapped Mortar Boards for Bowler Hats. A 30-year-old wishing to comfortably retire at 60 only has 360 paydays in which to achieve it! Conversely, those who can virtually smell the fresh sea air from the balcony of their retirement villa, must have a coherent strategy to gradually reduce portfolio risk as the final years of working life come into view.  If the foundations for wealth-building and protection are in place a more financially secure future can be achieved. 

 

Robert Williams is Branch Representative of IFG Asia, part of the IFG Group plc, with offices in Tokyo. www.ifg-asia.com / rdw@ifg-asia.com 

About Robert Williams