Planning your financial future and security need not be as daunting as some may think. True financial security entails dealing with those aspects of your life that have the potential to derail your goals and aspirations. Obviously these will differ from person to person, couple to couple. However there seems little point, for instance, in committing to a savings programme if some aspect of your life, not dealt with, has the potential to disadvantage you.

Creating a meaningful plan for your financial future and security requires you put these issues in order. In time you will need to address the investment playing field - a field that is loaded with misconception, emotion, fear and often can involve recommendations made by people unqualified to do so. There is insufficient space to go into the detail here but there are some essential rules to be followed.

The first step in making an investment is to know why you are making it. How long do you wish to remain invested? What degree of volatility are you prepared to accept in order to get where you desire? This is referred to as your “risk profile” and there are ways of measuring it, so you don’t end up owning assets not suited to you, or an over weighting to one particular asset class.

It is so important that you fully understand the risks associated with making any type of investment. A decision to put money on term deposit at your bank may from a credit worthiness point of view, probably be ok. However you need to check that you are achieving a return ahead of inflation and tax, known as a “real return”.

As you get older the degree of flexibility available to you for planning reduces, so it is a good idea to get on to it as soon as possible. It is not something to be feared as the process can be liberating. To know your plan works for you and is dovetailed to your needs will put you in a better state than failing to plan.

"A Disclosure Statement under the Securities Markets Act 1988 relating to the financial adviser associated with this article is available on request and free of charge".

Our source:  David Solomon, Director, New Zealand Financial Planning. Telephone: (03) 375 4040, Email: davids@chchnzfp.co.nz