A friend says my wife and I should see a financial adviser but I don’t think we earn enough for it to be worth it. Our combined income is between $130-$140,000pa. We have two children in primary school and are paying off a $300,000 mortgage. We don’t have much money left over to invest in shares. Is paying for advice really worthwhile for someone like us?
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This is a question that captures the essence of the new age financial adviser, better called a Financial Planner, which is helping people make sense of what is going on financially, and providing ideas for strategies which can improve a client’s financial situation. Providing investment solutions is just one part of what a financial planner can do.
Your situation is one that would be common to many, that is working, raising kids with all the costs that come with that, paying a mortgage and then feeling as though there is nothing left over to save. This is exactly where a financial planner can help you better understand what is going on, understand things you could do now to not waste these working years, and also to provide a reassuring vision that all will be OK.
For example, a financial planner may help you understand that when sticking to a realistic regular spending budget and after paying interest on your mortgage that you could have some funds left over. This would be called your cashflow surplus. You could then discuss what you could do with that surplus. Do you direct it to paying down your mortgage quicker? Do you contribute some to super using salary sacrifice? Do you spend it paying interest on an investment loan for a property, shares or managed funds? Or do you spend it on holidays or increase your regular spending? Or can you do all of these things? There will be many options available and a financial planner can help you understand the pros and cons of these various strategies.
Further, a financial planner can help you understand how your superannuation is invested. Many people do not really understand the make-up of their superannuation investments with respect to the risk taken on board, and the expected outcome in returns. There may be a more suitable investment option to consider within your existing superannuation plans, based on your lifestyle objectives, expected investment timeframe and tolerance for volatility.
This kind of conversation can be extremely useful to have a better understanding of what you have and what you are doing, and may be all the reassurance you need to feel more confident with your financial situation.
Where it is useful, a financial planner can do a financial projection for you to help you understand what your current expected financial destination is. Will you have your mortgage paid off by retirement? How much will you be able to spend in retirement? Can you afford to have regular holidays and car upgrades during retirement? Understanding this picture can be an extremely satisfying and liberating experience, as often people are in a better financial situation than then realise when you look at the bigger picture. A financial plan would then be able to show you the expected outcome when adopting a number of financial strategies, so you can see the expected benefits available. This is pure financial planning. Investment solutions – only where and when needed - would be the next step.
The hardest time financially for most people is the period you are in now. Getting some advice now from a Financial Planner can lead to a big difference in expected outcome for you, if you know the right things to do now. Let time work for you to increase wealth. Let information reassure you that life is looking good and you are on track to achieving your financial goals.
Expect to pay a fee for these services as needed, with a good independent Financial Planner charging a few hundred dollars to start you on a path for better financial understanding and control.
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