Transition to a Financial Plan
- Julia Docker
- Jan 8, 2019
- 3 min read
Financial Planning is a process that adds real value to a person’s life when they are at a transitional stage in their lives.
By transitional we mean an event where they need to make important decisions about their future and the way in which money will deliver what they are looking for in their lives.
We have identified a series of key transition points and in this series of blogs we will identify why they are so important and why a plan is needed.
1 – You are about to finish work and move into retirement
This transition point is probably the one that attracts most attention.
After all, retirement is for many people going to last a very long-time indeed.
They will want to ensure that their financial resources are going to be well employed.
It is also a time when regular income from employment is going to cease and income from other sources will need to be generated.
This can be a challenging time where we need to think about the best way for this income to be generated.
We often speak about a “batting order” where we work out the most tax efficient and sustainable way to create this income from pensions, ISAs, cash accounts, share portfolios and rental income from buy to let property and indeed from other sources.
Using lifetime cashflow forecasting as an integral part of the Financial Planning process we can help the retiree to understand what their financial future looks like and whether they can afford the retirement lifestyle they are seeking.
2 – You are about to change jobs
This event often cause a person to consider their financial position both now and into the future.
It may well be an exciting time with new opportunities and challenges emerging from the job change.
Hopefully it may also come with an increased pay package, we hope so!
But how are you going to use this change to build assets for the future?
What level of pension contributions will you be able to make? Will you be able to accelerate the repayment of any outstanding mortgage debt?
Will you now be able to build up an emergency fund of cash or build longer term investment funds?
Lots of questions that will need answering and this can be provided through a Financial Plan helping you to answer these questions and many more and those important “What if?” questions about your future.
3 – You have been made redundant
It may be quite difficult to accept that it is the job that has been made redundant rather than the person but I have yet to come across anyone who has not taken this transition very personally indeed.
And yet very many people who I have met have later reported how positive the changes in their lives were after the redundancy was settled.
Many have gone on to start their own businesses or move into a job role that was either more suitable for them or something they had long aspired to do.
4 – You want to start your own business
We had a lovely experience with a client couple who were planning to build a new business enterprise in the west of Ireland a first class bed & breakfast facility in a coastal location that can only be described as “breath-taking”.
What they both needed to know is whether they had sufficient capital resources to complete their project.
When would the new business have to start generating income? If they needed more capital where might that come from?
Both were at work as they formulated their plans and quite a lot of work would need to be managed in terms of renovating the property that would be used.
The Financial Plan demonstrated that whilst one of them might continue to work until the project was completed the other could choose to finish employment now and become the project manager and this is exactly what they chose to do.
Financial Planning can be the important line between personal finances and a business plan
5 – You are getting divorced
This is both an emotionally and financially fraught time.
Both parties to the marriage will want to ensure that they are financially robust once the divorce process is complete, particularly so when there are children involved.
As part of the process both parties will have to provide details of their income and assets and the sharing of that income and those assets will be agreed by the courts.
But what of the future; will they both be able to afford a new home and have sufficient income to live the life that they want?
A Financial Plan will help to answer these questions.