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Blog #40- Why Most Financial Plans Are Absolute Faff…….

informed decisions blog

Blog #40- Why Most Financial Plans Are Absolute Faff…….

26th July 2017

Paddy Delaney


We are not writing or dictionary aficionados here but the noun Faff has been defined by the Oxford Dictionary as ‘A great deal of ineffectual activity’…….most financial plans are absolute faff!

So there, I said it! I said it, and the fact of the matter is that it is pretty true. Any plan worth it’s salt with regards to pretty much anything will be mostly faff, in hindsight. Bear with me and we’ll explain!

If you have a a financial plan with goals and clear steps involved in achieving those goals, then I enthusiastically tip my hat to you. You are in a more progressed state of financial preparedness than 95% of the population (at a guess!). If you are in the other, much more populated camp, you have yet to develop a financial plan…….you may also be questioning the reward to be had from the effort and hassle of creating one, and the title of this episode might have been agreeable to you!

We really want to thank Carl Richards for writing the book ‘Behavior Gap‘ which I have re-read (again!) recently. This book looks at how to help people stop doing silly things with their money. It also inspired my thinking for this episode, about Financial Plans, and how seldom they see the light of day!

Why Are Most Financial Plans Absolute Faff?

No matter how well thought-out, considered and accurate a Financial Plan is the plan will change, that is almost a mathematical certainty. If you have a goal and you set a plan to achieve it, over the course of 15, 20, 30 years you will most certainly change direction, for one reason or another. Your plan will go out the window and be replaced with another, your goals may not.

Mike Tyson put it best, and indeed with much more credibility than I will ever muster when he said ‘Everyone has a plan until they get punched in the face’!!

So, What is a Financial Plan?

There is no set definition for what a financial plan must look like. Referring back our recent interview with Stephen Browne, and you had a Voyant Plan from a Planner, it would be a detailed calculation of your figures over the remainder of your life, laid out in a graph format. This can then be distilled down to a few core areas of focus.

For other people, they desire nothing more than a 1 pager with 2 or 3 main financial or life goals, with a few steps under each outlining how each be achieved financially. This is obviously a very accessible plan. It may sound simple but it ain’t necessarily easy to achieve.

How Do We Create a Financial Plan?

Regular readers will be borderline sick of hearing me talk about ‘beginning with the end in mind’. Every plan has an end goal. If a Financial Plan is to be meaningful to us it really should be linked to our life goals. We will be doing an episode soon on identifying one’s life goals (we promise it will be practical and not airy-fairy!) and values, and this is important in identifying the ‘end’.

In creating a Financial Plan it is pretty accurate to say that the process of going through the above is the single most impactful experience. To actually take time out to consider what it of most importance to us in our lives. To dream big, to take the time to prioritise the elements of our lives which are of greatest importance to us. A critical part of the it can also include determining accurately where our money is coming from and going to, also known as budgeting, which is something we are hot on here at Informed Decisions!

Ultimately it the process of creating the plan will add as much if not more value to your financial life, and therefore directly to your actual life. Worth the investment of time? For sure!

How Do Financial Plans Go Off Course?

Any number of regular occurrences in life will resemble that punch in the face Tyson spoke about when it comes to your Financial Plan.

Let’s take for instance a friend who had me crunch some numbers for her on her retirement planning ideas. She wants to have sufficient savings built up by the age of 60, in order for herself and her husband to stop working, if she chooses. This is in conjunction with having sufficient plans in place to pay for education of their 3 kids, and a few years of part-time work. Based on her desired lifestyle and income in retirement, and willingness to accept volatility, she needs to save a certain amount every month toward a suitable pension plan.

So say she starts that plan, she has 28 years to go before her retirement plan comes to fruition. What could change in the mean-time?

Her goal of 60 moves inward or outward

Other priorities trump her retirement goals

Her investments perform above or below assumed rates

Her ability to save drops due to health or employment status

State pension age and/or amount changes dramatically

And there are many other occurences and circumstances which will result in us having to course-correct and adapt our plans, our goals can remain the same, however we will take different routes to get there.

The Result is a plan very unlike the original……suggesting that it was all Faff!

So Is It Therefore Worthwhile Creating A Financial Plan?

There is only 1 answer to this! The process of creating the plan can be a huge benefit and eye-opener in itself to the person or people doing it. If done right, with due care and consideration the goals will be meaningful and remain pretty constant over the long term. Yes the plan will change, and in hindsight you will wonder why you started off on a certain course at all…….but if you don’t start you will most likely never get to where you want to get to. Starting is the beginning…….so begin…..roll with the punches…and God Speed!

Thanks for reading.

Paddy Delaney

QFA | RPA | APA | Qualified Coach


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Paddy Delaney RPA QFA APA
Investment & Retirement Income Planner