Page 239 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes Step 3: Establish your Goals and Financial Concerns

During the self interview, you will have stated certain goals that they wish to achieve. These
may take the form of.

Short-term goals (such as a holiday, new car, or house deposit);
Medium-term goals (such as saving for the children’s education, mortgage reduction); and
Long-term goals (retirement, financial independence).
However, in order for these goals to be achieved, other aspects of a person’s financial situation
that require addressing may be identified from analysing their current position and goals. Some
examples are:

Asset protection,
Debt reduction in the event of death,
Effective transfer of assets on death or disability,
The need for an emergency account,

Conflict between investment objectives and risk profile.
The findings from your analysis should be stated clearly alongside the goals in the comprehensive
financial plan.

Step 4: Put in Place Recommendations to meet your Desired Future Financial Position

This is the step where much of your technical knowledge comes into play. Here you consider
each of the major strategy options that best meets the person’s financial objectives and specific
personal circumstances.

Cash Flow Position and Objectives (Expenses and Income)

Expenses

Are there obvious areas where expenses may be reduced without affecting your person’s lifestyle?
By examining each line of expense, you might identify other areas that you may have missed in
developing the strategy. For example, the examination of medical expenses might remind you
to look at the person’s employee benefits position and determine whether the person is a
participant in the company’s group insurance.
Similarly, by looking at the taxation liability you can begin to determine if there are any simple
yet effective tax strategies that you can employ These might include:
Income splitting;
Salary sacrifice; and

Negative gearing.
Income

Next, you can examine the income position and while there may not be many ways of increasing
income for a wage or salary earner, you should certainly ascertain if they are in receipt of all
their retirement entitlements. In some respects, this may inter-link with specific investment
products that you may ultimately recommend.

234 LOVELY PROFESSIONAL UNIVERSITY