PERSONAL PLANNING FOR THE FUTURE In association with AIB

Adrian Moynihan, Business Startegist, AIB

We cannot always predict what will happen in life or in business. Therefore it is essential to plan well in advance because through better financial planning goals can be realised more effectively, writes Adrian Moynihan

As all business owner managers know, sound financial planning is essential to securing the long-term success of your business. It’s about analysing your business’s current and desired future financial position. It’s about deciding what your business’s goals are and working out ways to achieve them. It’s about thinking ahead.

However, it is not just your business’s finances that you need to sit down and plan for. Financial planning is also required for your personal finances. Just like with a medical check-up, you should have a ‘financial health check’ at least once a year and in particular after significant life events such as getting married, starting a family or starting your own business. You should sit down and assess your current financial position and desired future financial goals. There are a number of key factors to consider when planning your financial future:

GET EXPERT ADVICE

People regularly seek expert advice for many everyday issues. For example, if you are sick or feeling unwell, you go to a doctor. So, why should it be any different when it comes to money matters? You should talk to your bank, financial institution or financial consultant who will help you determine your personal needs and goals. Analyse your current financial position, highlight any shortfalls or gaps and put forward recommendations to improve your long-term financial position.

START NOW

No matter how much or little money you currently have, it is important that you use it as effectively as possible. Regular savings will help ensure that you will have adequate access to cash when and where you need it. You should try to set a portion of your income aside on a regular basis, i.e. each week or month, for your long term needs. If you don’t, you may find that when you need a lump sum, you won’t have one available to you. In addition, you could also use a portion of your savings to help pay off any credit cards, car loans or other borrowings when you can. That way you will cut down on the length of your borrowing and help reduce your interest bill. Remember that you work hard for your money and therefore you need to make sure that it’s working just as hard for you. If you haven’t done so already, you should start saving now.

THINKING LONG TERM

When planning for your long term financial future, it is important for you to consider your long term income needs. Therefore, it is worthwhile examining the merits of starting a pension. It is a worrying fact that out of a workforce of over two million in Ireland, over 900,000 people do not have a private or occupational pension. The State is spending €2.8 billion on pensions annually however too many people will be relying on the State Pension (currently €238.90 per week) for their future income. How would your lifestyle and that of your dependents or family be impacted if you had to live on €238.90 per week? While some self-employed people still prefer other investment options to a pension, such as property, however, making pension contributions remains one of the most tax effective investments, as tax relief is available on contributions made today. You should ask your financial institution of financial advisor about the tax benefits available to you by taking out a pension.

PROTECTION FOR THE RAINY DAY

Most people realise that it is important that both themselves and their family are adequately covered in the event that their income dramatically reduces due to death, or serious illness. However, at the same time, it is fair to say that topics such as life assurance and critical illness cover do not generally set the pulses racing and that many people believe that such cover is both too expensive and complicated to arrange. This is maybe the reason why, in many cases, people are not adequately covered in the event of one of these unforeseen circumstances actually occurring. It is essential however that both you and your spouse or partner have sufficient cover as even if it is not the principal ‘bread winner’ who dies or becomes seriously ill, the whole family can still suffer financial problems. For example, without sufficient cover to pay for a childminder, a surviving parent may have to give up work to look after the children.

PREPARATION IS KEY

Life changes so rapidly, events such as marriage, buying a house, starting a family, starting a business, retirement all seem to occur as a natural progression. However too many people find themselves faced with decisions and situations that they are not financially prepared for. Financial planning is simply a way of helping you ensure that you achieve these goals. Start thinking about it today.