What you need to know about professional financial planning

13.11.2020 | Financial Planning

The only reasonable answer to the complexity and challenges of modern finances is through professional financial planning. Only through a well prepared financial plan, regularly revised and relentlessly executed, can one achieve durable wealth and good financial condition.

That also means peace of mind and productivity- the kind you can apply to all areas of your life.

Most British people are unaware of the benefits of professional financial planning. That is why the total household debt in the UK in 2017 was £1,630.1bn, which has increased by 7.35 percent in the last 5 years.

The average amount of debt per household in the UK is £57,490, says Money Charity. That means that there is a huge debt crisis in the country. Brits have serious problems with making payments on time- even basic bills like electricity and gas, and of course regular mortgage and rent payments, are affected.

It seems that as time goes by, we are seeing more and more unsecured debts, very expensive credit cards and payday loans. And there has even been a new debt created: student loan schemes, which so far look like a catastrophic experiment.

However, there is no such a debt you cannot recover from, and there is no such habit – like for instance excessive spending – that you cannot get rid of. The good news is that financial planning is becoming more and more popular, and there are more professional financial planners on the market.

What are the elements of financial planning?

First, financial goals have to be set up. In order to do that it’s necessary to understand and define well your current financial standing, to be able to create a proper future financial goals. I think it is one of the most complex and difficult tasks you can imagine because finances affect absolutely everything we do. This is why it is so crucial: planning finance is pretty much like planning your entire life.

Secondly, net worth must be defined, which refers to the relation between assets and liabilities. A fantastic exercise, especially for people who mistake life on credit with real wealth.

An analysis of cash flow enables you to understand how much of your budget is spent on debt, upkeep, education, savings and investments, and so on, depending on individual circumstances.

Retirement strategy is necessary to determine when retirement must commence (at 50, 60 or 65 years) and how much you could get per month during this period. It might be 100% of your current income, or even more- but it might also be somewhere around 70% or 50% of your current monthly or yearly salary.

Making a risk management plan allows you to protect your assets and all your future financial operations.

An investment plan should contain the short and long term comprehensive investments in different financial instruments, but also in businesses, gold or real estate design, to multiply personal profit.

A tax reduction plan includes all strategies to protect your income and uses different kinds of financial instruments.

An estate plan leads to maximise personal profit through well prepared transaction and effective protections of properties.

A business succession plan is important for all business owners.

And the final- but absolutely vital- aspect of a financial plan is to regularly review and adjust some its elements if necessary.

Let’s be honest: the world around us with its ubiquitous marketing communications tries quite effectively to transform us into consumerist shopping-lovers, programmed by our emotional impulses to buy.

Financial planning gives us back the crown of rational and thinking creatures who are able to control their impulses, and therefore create the best possible future.

Andrzej Manka

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Andrzej Manka

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