What’s the Plan?

Looking back, I have posted on a wide variety of subjects over the last year or so. It’s interesting to note that the posts that get the most views are almost all related to specific investment products.

I found this out years ago when we were doing financial planning seminars. Often we would spend 20-30 minutes on a specific financial planning issue, and then for the last 10 minutes we would have a guest from an investment company talk about an investment product or fund. All of the enquiries after the seminar were related to the product, not the planning process. I concluded that people find it easier to examine a product and decide if they like it or not, than to think about long term planning.

Maybe planning is just too hard? Certainly many people are busy and pushed for time. For that reason I’ve decided to boil it down to its simplest form. Financial planning in three quick steps. Here we go:

1. Have a plan!
2. Cover the basics
3. Think about where you will spend the money

If you do nothing else then at least spend some time on these three points.

Have a plan – are you more likely to succeed if you have a clear goal and a simple step by step plan how to reach it? Of course you are! Where are you going to be in 10, 15, 20 years? What do you want to have? About how much do you need?

“I should save money for my daughter’s education” is not a plan. “I need $80,000 in 18 years time for my daughter’s education, and I’m going to start investing $200 a month from now in order to get there.” – now that sounds more like it! (calculated on average return of 6.5% p.a. by the way)

Ask yourself some simple questions and at least get a basic roadmap. The plan can be adjusted as you go.

Cover the basics – read this post, take action on these three points and breathe a sigh of relief! (Emergency cash reserve, basic insurance, some kind of pension)

Think about where you will spend the money – Are you staying where you are now forever? Are you likely to return to your home country or go somewhere else? Go with the most likely outcome and save in your base currency. Also, think about the most tax efficient way to get the money you save now back there. You may need to get some advice on this but at least start thinking about it.

And that’s it! If you get to work on these three points, you have probably done more financial planning than most people do in a lifetime!