When you read or hear the words “wealth planning”, what first comes to mind?
Most likely, at some point, many of us have thought of wealth planning as being about investing, growing our money, and becoming rich enough to retire in style. That seems to be what the financial media tells us most often – so it is no wonder.
Of course, there is some truth to that. Investing, getting good returns, and reaching a state of freedom from having to work for money can all be part of the wealth planning process, but I find that sort of characterization is missing a crucial part of what wealth planning really does.
The investing piece, while important is just the vehicle that we use to get from where we are today, to where we want to be. The state of financial freedom (however defined) is really one of many possible goals or destinations. What I believe is most valuable about wealth planning done right is that it can help us to achieve financial clarity.
If I had to name one of the top concerns that comes up in initial, exploratory client meetings, I would say that it is obtaining such clarity – though it is not always expressed in exactly those words.
What financial clarity looks like
Through the wealth planning process, what we are really trying to help clients to do is articulate what is most important to them in their life, find ways to define what that may mean for them in financial terms, and allocate and direct their resources to supporting their purpose.
Often that involves having deep conversations about their values, doing the necessary mathematics to quantify how much they need and when they need it, creating an accurate picture of their current financial position (insurance, savings, investments, income and expenses etc.), and then, charting a reasonable and reliable path forward.
Doing so supports them in making sense of what they have and where they are in relation to where they want to be, as well as what they need to do to get there. In many cases, even though they have not yet entirely reached their goals yet, the initial analysis and the clarity it brings has many benefits.
- Financial clarity assists us in tracking progress and acting accordingly
Clearly defining our wealth goals can be very valuable in giving us a way to monitor our ongoing efforts to reach our desired result. It can help us find the motivation to act too as the target becomes more real and less fuzzy. When things are clearer, it also tends to become more obvious what it is we need to focus on or change to achieve what we want.
- Financial clarity allows us to make informed decisions
A comprehensive plan that gives us a complete overview of our wealth and how it can be allocated purposefully to support us in each area of life creates a structure that lends to informed decision making. Whenever something changes, or we consider changing something in our lives, we can use the plan to assess how it will affect our financial future and weigh the potential trade-offs.
- Financial clarity can help manage money-related anxiety
Knowing exactly what it is we have and what it is allocated to do, and that it is supported by a reliable investment framework, appropriate insurance and a well-considered estate plan can be helpful in giving us the assurance that whatever happens along the way, we will be more than okay. While some uncertainty in life is unavoidable, cutting through the financial fog and wealth baggage we sometimes accumulate, can help us quieten some of our worries.
- Financial clarity can empower and free us
One of the best parts about financial clarity? It can grant us the freedom to pursue some of what we desire now, instead of having to wait until we have it all.
For example, if you want to take more risk with a portion of your investments, but do not know if you would be directly jeopardising your future, the knowledge that you are on track to reach your goals over the long term will tell you how much you can risk and give you the confidence to risk it. If you want to spend and maximise your current lifestyle, such clarity can help you determine what you can spend today and still achieve your long-term goals.
For me, though I am far from complete financial freedom, the knowledge that I am on a reliable path to eventually attaining a reasonable retirement allows me to give more freely of myself to others in terms of both time and money. Being aware of where I stand and where I am headed means I can gift others without reservation within the limits of what I can afford and prioritise time with family, or meaningful service, above purely financial pursuits.
Do you have a clear picture of what is enough for you and what you need to do to reach it reliably?
What would you spend your excess time, money and energy on if you knew your goals were within reach?
This is an original article written by Bryan Chan, Client Adviser at Providend, Singapore’s First Fee-Only Wealth Advisory Firm.
For more related resources, check out:
1. How to Build a Good Wealth Plan
2. The Importance of End-of-Life Planning
3. Are You Getting the Best Value from Your Wealth Adviser?
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