In yesterday’s article we talked about the six step financial planning process and how we use that as part of our client interviews. In today’s article we’ll take that a step further and show you a concept we use with our clients called the ‘Wealth Snapshot’.
As part of your initial appointment with us, we’ll ask a range of questions about your goals and plans for the future and your current financial situation. We do this so we can find out where you want to go, and to learn about the resources you currently have available (cashflow, debt, investments etc) to help you achieve your goals. We record your answers in a document called a Financial Needs Analysis (FNA). We use some of the information in the FNA to complete the Wealth Snapshot.
The Wealth Snapshot provides you with a range of questions and you are asked to score your answers on a scale of 1 to 10. There are seven elements to the Wealth Snapshot:
- Cashflow
- Debt management
- Asset Protection / Insurance
- Estate planning
- Investments
- Goals
- Financial confidence
In today’s article we’ll focus on the first five.
Cashflow
Your cashflow (income) is possibly the most important element in achieving your goals. When you’re working and saving for the future your cashflow enables you to fund your current living costs and save for the future. If you don’t have enough cash flow, or don’t manage it properly, you’ll have trouble funding your current living costs as well as investing anything for the future.
We ask clients to examine their spending. They score points if they have a budget, if it is monitored regularly and if they spend according to plan. We also look at how the money is used and whether they’ve invested it in the most effective way.
Debt Management
Many of our clients have home loans or other personal debt. The problem with personal debt is that it is not tax-effective, and uses up a lot of cash flow. We look at whether they have an appropriate level of debt based on their income and assets, and whether it’s been managed according to plan. We’ll also help people put plans in place to reduce their debts early (if appropriate) or use debt in a positive way to gain investment leverage.
Asset Protection / Insurance
There’s no point putting a financial plan in place if you don’t protect yourself. You probably make sure your house and car are insured, but do you know if you’ve insured yourself?
In this section of the Wealth Snapshot we help you understand the different types of insurance cover available (life, disability, critical illness) and work with you to determine what you want that cover to do or provide for you in the event of a claim. Everyone’s answers are different. Based on your answers we’ll help you determine how much cover you need, and we then look at whether you need to increase or decrease your existing levels of cover.
Estate Planning
When you die, you probably want to make sure your assets go to the right people. In this area of the Wealth Snapshot we look at whether you have the right estate planning documents (Wills, Power of Attorney, superannuation death nominations) and whether they need updating. We don’t provide legal advice so we’ll refer you to a legal professional should you need assistance with some of these documents.
Investments
The final area we cover is your investments. For many people, this is all they think about when they come to see a financial planner, but we’ll show them how the other areas we’ve outlined above are just as important. Having investments without insurance is a bit like building a house without a proper foundation – it may look good, but when storms come it’ll fall over.
In this area we look at the investments you have – superannuation, managed funds, bank deposits etc – and help you decide whether you’re investing enough to achieve your goals, whether your investments are in the right places, and whether you’re taking an appropriate level of risk for the goals you want to achieve.
Tomorrow’s article – Goals and Financial Confidence
In tomorrow’s article we’ll look at the remaining two areas of the Wealth Snapshot – Goals and Financial Confidence. We’ll show you defining your goals is one of the most important steps in the financial planning process and we’ll ask some questions to help you gauge how confident and comfortable you are with your existing financial strategy.
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Impact Financial Coaching is a financial planning business in Adelaide, South Australia. We’d love to help you with your financial planning needs. You can contact us on 08 8364 0066 or send us an email to arrange a no obligation, complimentary first appointment.
Important information
This article contains financial product advice of a general nature only and is not intended to constitute personal advice. It does not take into account your particular investment objectives, financial situation or needs. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in the publication.
Financial Wisdom Advisers are Authorised Representatives of Financial Wisdom Limited ABN 70 006 646 108, AFSL 231138, a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.
