28 Nov Bringing a Fresh Perspective to Financial Planning & Advice.
3 months ago, I joined Tri Everest Wealth Management Limited as a business support intern as part of my 3rd Year Commerce Global Experience program. Through my time and experience at the firm to date I’ve built on a foundation level of knowledge to a deeper level of knowledge and understanding of financial planning and I aim to dedicate these next 4 blogs to what I’ve learnt about financial planning and how I find it relevant to improving both lifestyle and financial resilience.
What is Financial Planning?
If I could summarize financial planning into a short definition, it would be “understanding needs and risks, quantifying the preparation needed, and helping manage the life that follows”. It is not about reshaping your life and putting your money first, but rather about treasuring your time, commitment, and ambition also – ‘don’t count the days, make the days count’ – Muhammed Ali. I had at first underestimated the importance of planning, but at its core, financial planning is one of the key cornerstones of planning for our future and connecting the link between our needs, wants, and finances.
What am I preparing for?
One word I keep coming across that we all subconsciously account for but never mention is risk. It is a primal reasoning tool we use at the base of every decision to estimate the difference between the imposing danger and the positive gain from overcoming it. In the finance world, this is the measure for a negative event probability and associated features including impact, mitigation, contingency, reduction, and exposure. I would say that these risk elements are what we plan for and the magnitude of our preparations sometimes aligns with the impact of the risks. Luckily, I have been exposed to most sectors of the finance world through this internship, whether it is investing, insurance protection, retirement planning and saving, and the one thing they all have in common is risk mitigation. Having dealt with clients from all parts of the world and walks of life, I have learnt that nothing in life is certain and that there isn’t always an easy correct choice at hand. However, engaging in financial planning advice will help resolve this confusion and establish a foothold to begin controlling risk.
One of the easiest choices to make towards financial preparation however is saving. Furthermore, I believe pensions to be a vital consideration when investing in your future. This is something I paid no heed towards at first, but over the past 3 months it has become front and center in my learning.
What should I focus on?
The life you aim to create should not have to compromise life today. I have been challenged to try and understand what commitments people may undertake, something that is achieved only through conversation and an open mind. Your commitments may narrow your scope for thinking about your pension now, but I have learnt there is always room for a start. I wish to highlight that if you have a job, you have already taken the first step. Since the state pension is based on PRSI contributions, should you build up at least 10 years’ service, you will likely be eligible, but I now understand, this will not be enough!
Can I just do it later?
I have seen people of all ages consider pension contributions and by far those who start earlier have the best foundation for a pension fund on which to build on. By allowing yourself and your advisor time to adjust your contribution strategy, you will achieve a stronger understanding of your own contributory limits thus building confidence in investing in yourself. The first step I took in understanding pensions is seeing the future benefit in contributing as much as you can afford, and in so doing accessing income tax relief and tax-free growth in your pension all in line with legislation.
I would describe financial planning as learning how to swim. You start in the shallow end, taking it easy, assessing your current situation and basic needs and as you progress deeper, there is more motion and thinking at play. As such I aim to explore what I believe to be the habits of good financial planning and the life that follows in the next three posts.
– ERNESTAS.