No two individuals are the same when it comes to wealth-building opportunities, risk profiles, and their financial situation – and this is why financial planning is so important.
Financial planning can support you in maintaining your current lifestyle, preserving wealth for retirement and growing your assets, but how exactly does it achieve this? We examine the different ways financial planning can be used to maximise your assets.
Life stages and unique situation
Financial planning takes your current and future life stages into account, including considerations like superannuation, assets, liabilities, total income, expenses, and attitude to risk. In turn, these impact your financial and lifestyle goals, earnings potential, financial opportunities, tax profile, and risk management needs. A financial planning strategy takes these – and your goals and objectives – into account to formulate an individualised a strategy for you. It also relies on specific projections like your assets’ rates of return and inflation to help with planning.
For example, in middle age – as your income potential peaks and you get closer to retirement – you could take the opportunity to make extra superannuation contributions and take advantage of government co-contributions. On the other hand, if you’re early in your career and haven’t started a family, you could have excess cash to save for a housing deposit and you could invest these in low-risk options in the interim.
At each life stage, financial planning can ensure you’re investing in the right assets for your risk profile and future plans, through tax-optimised structures to protect, preserve, and grow the value of your assets.
Superannuation and retirement planning
Your superannuation is a fundamental asset for retirement planning, and your financial planning strategy can incorporate various contribution strategies to maximise your retirement benefits. For example, you can choose to salary sacrifice and make pre-tax contributions.
Effective financial planning will also give you valuable guidance on the right fund for your superannuation so you have a better chance of maximising returns for your super. Finally, your financial plan can also incorporate how to best withdraw your super so you can live the retirement lifestyle you desire.
Entitlements and benefits
A comprehensive financial planning roadmap will also incorporate social security strategies to help you optimise income support entitlements. For example, if you’re eligible for the Age Pension, your income and assets will determine whether you get the full or part pension.
Reducing assessable assets by paying more into your partner’s super (which isn’t counted as an asset for Age Pension purposes) could be advantageous if he/she hasn’t reached Age Pension age. Gifting money to relatives, increasing the value of your home, and prepaying funeral expenses are other strategies that could also increase your Age Pension benefit.
Asset and wealth protection
Financial planning can be used specifically to protect asset value through tools and strategies like regular savings, cash flow management, appropriate debt for investment, and investment structures. For example, the right cash flow management strategy can help you meet your immediate expenses, as well as making sure you’re fulfilling mortgage repayments and savings targets. Additionally, leveraging negative gearing strategies could enable you to build your investment portfolio and grow the value of your assets. Finally, an estate plan could also help protect your assets by seeing to it your wealth is transferred to your beneficiaries in the most tax-effective way.
Risks, success factors, and barriers
A comprehensive financial plan takes risks, success factors, and barriers to goals into account. As an example, you could protect you and your family against the risks of losing the ability to earn an income with income protection insurance. Structures like trusts could be used to reduce the risk of losing assets in the event of relationship breakdowns. – however it’s important to note that the family court has the power to look-through controlled entities in divorce proceedings.
Success factors for achieving your goals could be things like preserving and expanding your earnings potential and committing to a realistic savings plan. A financial plan might also highlight barriers to success, which can include controllable things like poor financial discipline, as well as external factors like recessions. This allows you to implement strategies to counteract them – like learning to adhere to a budget. You could also change your asset-allocation strategy (mix of investments) to minimise exposure to certain markets.
Implementation and ongoing review
Ongoing review and adjustments are integral to financial planning, as this helps you stay on track as circumstances, regulations, and your priorities change. Regular reviews ensure you’re achieving specified milestones, and help you make adjustments where needed. For example, a review might indicate you could benefit from restructuring your loans, taking out more insurance, and directing more cash towards super. All of these can help you preserve and grow the value of your assets.
Start growing your assets now
Financial planning with the guidance of an expert adviser could maximise your assets while empowering you to achieve your current and future life goals. From super and retirement planning to specific asset protection and addressing risks and barriers to goals, a comprehensive financial plan can preserve and build wealth because it’s tailored to your life stage and unique circumstances.
At Prime, we offer simple, honest advice to help our clients build, manage, and grow their assets. Contact us today for a discussion about how our wealth management experts can assist you with a tailored financial plan to build your wealth.