Poet Robert Burns understood more than most that life often gets in the way of our good intentions when he wrote this line in 1786.
Sometimes life events such as the birth of children, unexpected expenses and career changes can make it tough to stick to your plans.
One plan of particular importance regardless of your life events is your financial plan. This living document helps you map out your income against the investment milestones you would like to achieve to help you reach and maintain your desired lifestyle.
So what’s the best way to steer a true course for your financial future?
It’s the nature of financial markets to rise and fall. For instance, over the past five years the All Ordinaries index has risen from 3111 points in early March 2009 to around 5228 points in early October 2013.
As markets transition through these peaks and troughs it’s easy for investors to consider changing the strategies they have put in place to help them achieve their goals. For instance, during a market rally it can be tempting to walk away from a disciplined dollar cost averaging strategy and suddenly make a substantial investment in the market.
But a good financial plan should take market volatility into account. So no matter how equities perform day-to-day, you can ride through the market’s ups and downs to help reach your goals.
It’s not just market fluctuations that can make it tempting to divert from a financial plan. According to the latest labour market statistics, more than 200,000 people lost their job between February 2012 and February 2013, as a result of a retrenchment or because their employer went out of business 1.
A major event such as a job loss can prompt us to question whether our long-term financial plan is still suitable.
However, a good financial plan should be flexible enough to adjust to changing circumstances, no matter whether you are retrenched, get married, have your first child or change your career.
The key message is not to allow major events to place your goals at risk. In fact, a significant life event is often when the true value of a financial plan reveals itself.
If something important happens in your life, it’s a good idea to talk to your financial adviser about the best way to manage your finances and at the same time stick to your financial goals.
What are some ways to get disciplined about achieving your financial goals?
- Set a small number of big goals that mean something to you
Select your three most important goals and think about how it would feel to realise those goals. Talk about your goals with your financial adviser and the best way to achieve them.
- Break down your goals into manageable pieces
Work with your financial adviser to construct a journey of small steps to reach your big goals.
- Frequently review your plan
Remind yourself of the goals you committed to and the small steps you agreed to take.
Above all, remember a financial plan is a living document.
It’s an idea to see your financial adviser every six months or every year to review your goals and assess your performance against them, to help you steer a positive course for your financial future.
1. Labour Mobility, Australian Bureau of Statistics (ABS), February 2013