Planning for your financial future should begin at the same time your career does. It’s highly likely that one day you’ll look back and realise your initial choices will be the most critical of all. Missing out on critical opportunities at an early stage can have a dramatic impact on your success in years to come. The lament I hear most often is, “I wish I’d started sooner.”
It’s likely that, as part of your new employment package, you have substantial cash flow, but debt may also follow quickly. Although it may seem premature to jump on the planning bandwagon when there’s so much unchartered territory ahead, and your personal wealth management plans—once put on the back burner—can stay there for a very long time.
It’s likely that you’re also just enjoying the fruits of your studies, are pleased to be starting your career, and that you haven’t given too much thought to long-term goals and plans. Unfortunately, the consequences of inaction can be seriously damaging. A sound financial foundation is critical if you want to construct a successful future.
3 top tips to build a sound financial foundation:
- Articulate your personal long term goals
- Fully understand your salary package and make the most of it
- Create a financial plan that’s tailored to your long term goals
1. Long-term goals
Your long-term personal and financial goals will be the key drivers of your plan. It’s likely that these goals will evolve and change over time. For instance, if you’re single, the addition of a partner or family would mean adjustments, as would the dissolution of any family arrangements. However, by having a think about what you’d like to achieve, you’re laying a groundwork.
Ask yourself the following questions:
Would you like a property portfolio? A share portfolio? A well-diversified approach that requires both income and capital appreciation? A personal home and holiday home? Is extensive travel important to you? Will you have to factor your extended family’s needs into your plans? For how long do you want to work? Do you want to stay in your current career for life?
2. Make the most of what you have
It’s important to fully understand your salary package, entitlements, share plans, superannuation offering, compensation benefits, earnings and future earning potential, bonus plans and investments in order to best optimise each of them.
Each asset or potential asset has its own inherent set of risks and rules. Learning about your salary, the overall package and potential asset offers early on, can help you leverage later.
If you already have debt, it’s important to have a complete view of your liabilities too. With a ‘total balance sheet’ approach, you can more readily spot opportunities when debt offers the most advantageous way to access funds for investments or expenses.
3. Create a long-term plan
It is of vital importance to start early, and establish a long-term financial plan that integrates your lifetime needs and your wealth transfer goals. Yes, the plan will change over time, and it’s hard to imagine coming to the end of your working life when it has just begun, but it’s vital to start the trajectory early. Incorporate realistic projections for your income and expenses, taking into consideration family needs (immediate and extended, future and current) inflation, potential health care costs, insurance needs, aged care and other future factors.
Other considerations may include wealth transfer plans and the legacy you’d like to leave. Perhaps you’d like to include philanthropy along the way and support a cause close to your heart.
The best advice is to have a good hard think about your goals and sit down with an expert who can help you navigate what’s ahead.
An investment in an effective plan now will pay dividends for a long time to come.