Use a ‘wealth com­pass’ to show the way

Money Magazine Australia - - ASK THE EXPERTS - JACK­SON MIL­LAN Jack­son is The Wealth Men­tor, who helps ed­u­cate Aus­tralians to un­der­stand the lan­guage of money. thegamechang­ers.com.au

Firstly, my sin­cer­est con­do­lences for your loss and I can re­late to the fi­nan­cial bur­den these sit­u­a­tions can cre­ate af­ter los­ing my fa­ther last year to pan­cre­atic can­cer.

For all of my clients I rec­om­mend a self-as­sess­ment process of “sim­ple, sus­tain­able and scal­able” which is in­tended to act as a com­pass when ap­proach­ing your wealth jour­ney.

1. Sim­ple

Your over­all fi­nan­cial strat­egy should be sim­ple, and we break this down into six quad­rants:

Plan A

Cash flow – the in­flows and out­flows along with what should be left over.

House­hold debts – your cur­rent debts and your plan to pay them off.

Lifestyle plan­ning – your lifestyle goals and what you re­quire in terms of in­come or wealth to make them a re­al­ity.

Plan B

Emer­gency fund – how much you need in case the wheels fall off.

Pro­tec­tion – how you plan to pro­tect your­self against the un­fore­seen.

Es­tate plan­ning – how you plan to pro­tect and dis­trib­ute your es­tate.

These six as­pects will al­low you to have a good grasp on what you want, where you are now and what you can do to get where you even­tu­ally want to be.

Most of your plan­ning will re­volve around cash flow and I ad­vo­cate you com­plete a good per­sonal “profit and loss”, not a bud­get, as this is about work­ing out what your life costs, which is con­trary to what peo­ple think of when they do a bud­get, which is cut­ting costs.

2. Sus­tain­able

Most peo­ple don’t con­sider the sus­tain­abil­ity of their plans and as such they never have enough time to al­lo­cate to man­ag­ing their fi­nances. From your sit­u­a­tion it seems that your hus­band was ac­tively man­ag­ing a di­rect share port­fo­lio, so you need to ask your­self whether you are con­fi­dent in man­ag­ing this your­self and whether you want to sus­tain this for the long term. This will ul­ti­mately re­quire you to ei­ther out­source the task to an ad­viser or sim­plify the strat­egy into some­thing you can man­age bet­ter your­self, such as a di­ver­si­fied port­fo­lio of in­dex funds or ex­change traded funds.

3. Scal­able

Al­though you have en­dured an ex­tremely dif­fi­cult sit­u­a­tion you still want to be able to give your kids a leg-up in life and help cre­ate a nest egg for them, which may re­quire you to scale your strat­egy. This will re­quire you to en­sure the pre­vi­ous steps have been com­pleted to give you head space to start vi­su­al­is­ing your goals and what you want to achieve. In these dif­fi­cult times we tend to fall into a scarcity mind­set, just try­ing to make ends meet, and bat­ten down the hatches to weather the storm. But we need to try to switch to an abun­dance mind­set to help push us for­ward.

Take the time to ask your­self what you want and, more im­por­tantly, why you want it so we can de­fine the des­ti­na­tion and then re­verse-engi­neer this into a plan. This will hope­fully give you the steps you need to take to turn these dreams into goals and help you work out how much in­come you need to bring in to make this a re­al­ity.

Your sit­u­a­tion has many com­plex­i­ties, such as the de­fined ben­e­fit pen­sion and other mov­ing parts that re­quire ex­pert ad­vice. I urge you to en­sure that you reach out to a spe­cial­ist be­fore you take ac­tion to avoid mak­ing any de­ci­sions that may lead you astray.

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