Step 1: Clarifying Your Current Position and Goals
First we clarify your current position.
Determining where you are now provides a starting point for a plan. It involves taking a financial snapshot of your current position by producing a personal balance sheet. The balance sheet shows what you own (your assets), what you owe (your liabilities) and your net worth (your assets less your liabilities). It differentiates between lifestyle assets (e.g. family home and vehicles) and investment assets. It is also helpful to assess your income and expenditure.
The Data Form we provide prior to our initial meeting provides areas for you to enter details of your assets and liabilities along with your income and expenditure. It also includes space for other information about your current position such as Personal Data, Family Details, Wills, Trusts and Professional Advisers. We can complete this together if you prefer.
Next we clarify your goals.
A critical step in the planning process is to clarify your goals. Many people do not set goals and those who do often make vague statements. The Goals section of the Data Form requests that goals be as specific as possible, including timing and costs. We can work with you to help clarify your goals.
The importance of goals is reflected in the statement by Henry Kissinger that, “If you don't know where you’re going every road will take you nowhere”. It is a critical part of any journey, including your financial journey, that you have goals for where you want to be in the short, medium and long term.
It is important that the planning horizon is determined so that short- medium- and long-term goals can be co-ordinated in a single plan. For example, a couple might have a plan for a high-quality education for their children, but be able to divert that income to retirement planning later. Often the final extent of the planning horizon is death itself, which is one event whose occurrence will certainly reveal the effects of poor planning for those still alive. The plan can encompass planning for intergenerational wealth transfer, thus providing enduring benefits.
Where goals clash, the conflict must be identified and resolved before proceeding any further. This emphasises the importance of prioritizing goals. Formal goal-setting provides the ability to regularly review goals and progress towards achieving them.