Financial planning is often misunderstood and many have misconceptions as to what can be expected from the process. A comprehensive, holistic financial plan addresses the financial and personal goals one may have, in the short, medium and long-term. In essence it addresses your particular circumstances and should be dovetailed to your financial needs.

NZers have a proud history of DIY but, when it comes to personal financial issues, we seem to hesitate at the prospect of paying for professional advice, let alone allowing someone to look at our financial position.

Often an individual/couple struggle through life only to find a few years before retirement there may have been a better way. Unfortunately, at this stage people are likely to find the alternatives available have greatly reduced. The world is ever changing and unless your focus is on all aspects of your financial welfare, all of the time, keeping up with developments is virtually impossible.

A financial plan is not just directed at investment advice. In fact investment is the last thing which is dealt with. Individuals and couples can have a myriad of issues to be addressed before investment comes into consideration. A recent American survey of the value of financial planning provided some interesting insights. People who have undergone the process feel more in control of their financial futures. In addition, during times such as the world faces at the moment, the survey showed those with a plan are more likely to stay on track during the tough times and consequently feel more optimistic and confident of their financial future.

Investment vehicles fall into the two categories of short and long-term. Don’t make the mistake of expecting a short-term investment to provide a long-term return and vice versa. It is very important investors know their ability to handle risk. “Risk” used in this context relates to one’s ability to handle volatility and should not be confused with the more common risk of losing money.
Another important factor is the credit rating of the investment being considered. Not all adhere to the opinion anything below Standard & Poor’s BBB- Investment Grade is the minimum credit rating to be considered. There are a lot of investors who would have benefited from adhering to this rule when it came to investing in finance companies in the local market over the last few years.
Source: David Solomon, Director, New Zealand Financial Planning
Telephone: (03) 375 4040_Email: davids@chchnzfp.co.nz

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