Money

Can financial planning help you have a wealthier life?

What you need to know to decide if paying for advice is worth it.
Financial planning involves meeting with a financial advisor to help you set and achieve goals.Getty

There are plenty of ways to get our household finances in order, save for retirement and enjoy life. While some are free, financial planning is an option that typically comes with a fee.

 The average cost of a financial plan is $3,300 when it’s set up, according to the Financial Advice Association Australia (FAAA). That cost rises to an average of $4,300 per year for ongoing financial planning advice.

So, is it worth it?

The answer is different for everyone, but it helps to start with an understanding of how professional financial planning works.

Unlike plans you might make yourself, this service is provided by licensed financial advisors – which is where the costs come in.

“Financial advice is a professional service that comes with a cost,” licensed financial advisor and author of Insufficient Funds, James Millard, tells The Australian Women’s Weekly.

He adds that the fees should always be explained to so you understand what you’re paying for.

“If an adviser can’t articulate clearly how you will benefit from this service, keep looking,” he says.

It’s also important to make sure the advisor is actually licenced to give financial advice. You can check the Financial advisors register on moneysmart.gov.au to confirm they have the right licence.

How does financial planning work?

In simple terms, financial planning takes a wholistic look at your financial and personal circumstances. From there, the financial advisor can develop a plan to help increase your wealth, financial security and other goals.

“Many people think in silos rather than overall i.e. my mortgage, my super, tax,” explains Helen Baker, a licensed financial advisor and author of On Your Own Two Feet – a book for helping women reach financial independence.

“We would look at all the assets and position and see how best to structure them and stretch money further with strategy, as well as investments.”

James adds that a good place to start is with your goals.

“Most people approach financial planning, whether it’s DIY or with a professional by jumping straight into the money side of things,” he says.

“However, the success of your financial plan will be driven by its connection to you achieving your goals and dreams. If you are clear upfront on what you’re trying to achieve, what we at Sufficient Funds call “Defining Sufficient”, then you give your money plan far more chance of success.”

You can take a DIY approach to financial planning, but may not get the same insights as working with a licensed financial advisor

What are the steps for financial planning?

For a professional plan, the first step is to find a licenced financial advisor. After that, the steps may be different depending on your circumstances but could include:

  1. Providing details of your income, assets, debts and cash
  2. Paying off debts
  3. Setting up an emergency fund
  4. Considering life insurance and income protection insurance options
  5. Making the most of your superannuation (and potential tax benefits from contributions)
  6. Planning and managing investments

Helen says one of the most important steps is becoming aware of the whole picture of your finances.

“You have to start somewhere,” she says.

“The changes you make should have a compounding affect over time that accelerate your wealth and put you in a much better position over time.”

James says another important step is to learn through the process.

“An advice relationship works best when the adviser is arming you with the information to make your own confident decisions, so lean into the process of education,” he says.

“Feeling educated and in control helps build a legacy of financial confidence for your future generations.”

How to decide if financial planning is worth it for you

The fees for financial planning mean that it’s not always affordable.

So, if that level of cost is a stretch, you may want to consider other low-cost or free options. For example, some superannuation funds provide financial advice or other resources.

It also helps to think about what you’re hoping to achieve through financial planning.

For example, if you’re unsure how to plan for the future or don’t think you’re making the most of your money now.

“Everyday financial concerns are a leading cause of stress. In times of rising cost of living, having your money sorted can provide an immense sense of relief,” says James.

“Many also see the benefits in terms of the relationship with money they can now [pass on] to their kids.”

It can also be useful to see a financial advisor when there are big changes in your life, such as starting a family or planning for retirement.

But if you’re not sure, you could always contact a few financial advisors to discuss your situation.

“You can almost always have a free initial call with a financial adviser to see how it all works. Use this to shop around and find someone who will ‘get you’ and you click with,” James says.

And whether you decide to pay for advice or take a DIY approach, ultimately it should lead to more awareness about your money – and more informed decisions.

*This article contains general advice only and may not be suitable for your circumstances. Make sure you seek financial advice appropriate to your individual circumstances before making decisions.

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