It’s not about the money

With the Commonwealth Games shining a light on the athletic talent of the Commonwealth and the stunning scenery of the Gold Coast, there are obvious analogies to be made between the culmination of a top athlete’s goals and the personal goal setting that should be part of a well constructed financial plan.

Goal setting for athletes is not simply a matter of setting a target for a personal best and trying to achieve it. Goals are often subdivided as process, performance and outcome goals. And just as in athletics, goals should form an integral part of any financial plan, and be categorised accordingly.

Financial planning is about much more than simply having £X at a specified date in the future. Yes, a measurable target (an outcome goal) is important, but on its own doesn’t mean very much.

A financial plan should also be about lifestyle – what is it that you want to achieve in life? Why is that important to you? What does having money actually mean to you and to your wider family?

Essentially a financial plan is like a roadmap that will guide you through life’s journey, with measurable targets along the way. It should take into consideration “what if ” scenarios, and cater for the unexpected. For example, what if I lost my job? What if we needed to bail out one of our children? What if we decided we wanted to buy a property abroad? What if the stock market crashed?

Equally, as financial planners, we need to think about reducing risk – rather like an athlete ensures that they warm up and warm down properly to reduce the chance of injury. For someone saving towards their eventual retirement, “what ifs” can be insured through income protection insurances, life cover and critical illness cover, for example.

Whatever stage an investor is at, risk can be reduced by diversifying investments – in other words, avoid putting all your eggs in the same basket. Here in Aberdeen for many years, investing in property was seen by some as having no possible downside – prices just went up, year in year out and buy-to lets were easy to rent out. The last few years have provided a sharp reminder that there are no guarantees.

Athletes also have to expect the unexpected and hopefully have a plan to deal with it. Trying to second guess what may happen is fraught with danger.

A financial plan, just like an athlete’s career, is not just a destination but also a journey. Circumstances change and a plan needs to be regularly reviewed and flexible enough to cope with all life throws at it.

“A financial plan should also be about lifestyle – what is it that you want to achieve in life? What does having money actually mean to you?