Financial planning for security and improved living

Press, 24 May 1988, Page 31

Financial planning for security and improved living

By

GARY BOURNE

In the present economic climate, the key to financial success will be financial planning. Accumulating money for its own sake is not one of the motivating reasons why you should take charge of your financial future. Rather, a desire to gain economic security, a comfortable retirement, and a happy lifestyle are far more powerful factors. While many individuals remain wary of making investment decisions following the sharemarket crash, the key to success will be to develop responsible successful financial strategies to achieve long-term financial satisfaction regardless of age, income or marital status.

To develop a plan for the future, it is very important that a complete financial analysis is made. Every plan must reflect the individual situation of each client and their own special requirements. No one investment or plan is suitable for every individual.

A financial planner follows six components of

the financial planning process: @ Collection and analysis of your financial information.

© Identification of financial problems. ® Identification of financial goals, objectives and priorities. © Provision of a written report to you with recommendations and alternative solutions. © Co-ordination and implementation of recommendations.

© Provision of periodic reviews and plan updates. You will benefit from having a clear organised picture of your finances and how to manage them to our maximum advantage.

An important aspect of financial planning relates to mortgage interest rates.

Some financial institutions are offering attractive lower rates including the opportunity to fix the interest rate at say, 14 per cent, for a period of around 10 years. At first glance, this may appear to be the solution to achieve lower mortgage repayments.

People contemplating such an action should stop and seek financial advice. They may well lock themselves into an interest rate that in six, 12, or 18 months time, will be well above the market rate.

It is highly probable, given the downturn trend in inflation and other interest rates, that a mortgage rate of 13 per cent could be available by December this year.

In five years time, if inflation is down to around 4 per cent, mortgage rates could be 8 to 10 per cent.

Someone now locking themselves into a rate of 14 per cent for 10 years could end up with a very expensive mortgage in terms of interest rates, and penalty charges if the contract is broken. Unfortunate financial decisions made now could generate financial disaster rather than producing a sound financial future.