Planning and taking action for financial success is as crucial as doing so for your business and career. While your skills, knowledge, and abilities may contribute to your business’s success, they may not be appropriate for planning your finances and building wealth. Seeking professional help from a financial planner is necessary for most financially successful people. A good financial planner will start by providing you with education to improve your understanding, enabling you to take personal responsibility for your financial progress by participating in the process. This knowledge will help you control your financial destiny, and you should supplement it by attending relevant seminars and reading appropriate books.

Building and creating wealth is crucial to establish and maintain a desirable lifestyle for yourself now and in the future. People are living longer, and the population of individuals aged 90 years and older is increasing rapidly. It is essential to consider how you will maintain your quality of life if you retire 30 years earlier and live up to or beyond age 90. Between 1991 and 1996, the population of 90+ year-olds in Australia doubled to 400,000. Currently, the average age people live to is 80, compared to 48 a century ago. Based on current trends, individuals born today will live to 130 years! (ABS update).

If you ask a group of 100 20-year-olds with similar financial backgrounds whether they intend to be financially successful, most will answer positively. However, the facts show that at the retirement age of 45 years, only 5% are either financially independent or wealthy. The rest of those still alive cannot survive on their financial resources. The distinguishing feature of successful individuals seems to be having clear financial goals.

Financially successful individuals seek professional help, which enables them to take personal responsibility for their financial progress by being involved in the process. They are aware that building and creating wealth is crucial to establish and maintain a desirable lifestyle for themselves now and in the future. With people living longer, it is essential to consider how to maintain the quality of life if one retires 30 years earlier and lives up to or beyond age 90. The population of individuals aged 90 years and older is rapidly increasing, with the Australian population of 90+ year-olds doubling from 1991 to 1996 to reach 400,000. Compared to a century ago, people currently live to an average of 80, and on current trends, individuals born today will live to 130 years. Despite most 20-year-olds intending to be financially successful, only 5% are financially independent or wealthy at the retirement age of 45 years. Having clear financial goals is the standard distinguishing feature of successful individuals.

The government has implemented initiatives such as the Superannuation Guarantee system to address relative poverty over time. However, the maximum investment in superannuation is only 9% of income per year, whereas at least 15% is required from age 20 to ensure a reasonable standard of living in retirement.

Most people have relied on the government to support them in retirement through the age pension. However, due to the rapidly increasing proportion of the population beyond retirement age, the government’s ability to support retirees is quickly diminishing. The yearly pension for a couple is only about $15,000, and the pension card is only worth approximately $2,000 per year for that couple. It is unlikely that one could maintain a desirable lifestyle with such limited financial support, and the pension is unlikely to increase by more than the current inflation rate of 2-4% per year.

Financial independence offers intangible but significant benefits such as security, peace of mind, and the ability to make choices without depending on or being dictated to by anyone else. The cost of instant gratification by spending all one’s income on consumption now restricts one’s freedom later due to a lack of money. Finally, when you are wealthy, your money will work for you, and you will not have to work for your money.

Financial planning encompasses more than just investment advice. It is as complex as your needs and requires skills and abilities to understand your circumstances and develop a tailored financial strategy that suits you. The strategy may involve planning investments and income, cash flow, savings strategies, superannuation, tax implications, loan management, leveraging advice, retirement income, estate issues, risk insurance, protection, distribution structures, identification of opportunities, and many other factors. The process is ongoing as your needs and circumstances change, along with changes in the economic environment. Ongoing advice ensures that your plan remains appropriate.

To assist your Financial Planner in maximising the support provided to you and be involved in the process, you should collate the following information:

• A list and description of your needs and objectives over at least the next seven years;
• An idea of when you would like to retire, and/or when you would like to choose whether or not you work, and how much income your investments would need to produce for that to be possible for you;
• Details of your current income and expenses (a budget for the next 12 months);
• A list of your financial assets and liabilities;
• Details of your superannuation and insurance;
• Information about your Will and any Power of Attorney;
• Business financial statements and tax returns;
• Personal tax returns.

When choosing a Financial Planner, it is essential to be comfortable with their style to derive the most benefit, and develop a relationship for the long term so that your adviser builds an ongoing, comprehensive understanding of your circumstances and needs. A good adviser will be thorough and understand your unique needs. Look for qualities such as apparent expertise, trustworthiness, attentiveness, discretion, and the standard of their presentations. They should also disclose their potential commissions and charges together with any referral fees paid to third parties. Check their reputation with their existing clients and ask about their formal qualifications. If in doubt, ask to see their Dealer’s Licence or Property Authority or both. Further details will be found in the Advisory Services Guide, a copy of which a registered Financial Planner should offer to you.

When it comes to making money, your financial planner should provide information about investments and the three broad categories of investment:

• Property;
• Interest-earning investments; and
• Equities (i.e. shares).

This can be remembered as the “PIE” of investment. You can invest in these things in three ways:

• Indirectly, by investing in Managed Funds. The advantage of this way is that you then have several specialist investment managers looking after your money, who have skilled techniques for maximising your returns from the investments they put your money into. So if you have a busy lifestyle and are in the early stages of your investment education, this way could be very appropriate.
• Directly in Shares, Property, or Interest-Earning investments. As you gain knowledge about investments and can afford the time, this way may become more relevant. You can also establish a self-managed superannuation fund with the assistance of your accountant. Again, the advantages are more control and avoiding the fees charged by Fund Managers.
• Trading in the three parts of the PIE.

Considerable wealth can be generated through involvement in very sophisticated methods of investment. However, you do need to study it carefully and be involved daily.

In order to achieve financial success, it is important to understand the concept of the Economic Clock. The economy operates in cycles, which are repetitive but not necessarily predictable, lasting approximately eight to ten years. Therefore, while wealth-building requires a long-term approach, it is important to identify the best-performing area at the appropriate point on the Economic Clock and allocate new savings accordingly. Cultivating the habit of saving is crucial for building wealth. Even starting with a small amount, such as $20 per week, if adequately managed over a working life of 40 years, one could accumulate $1.5 million. The value of savings could increase substantially with more significant contributions, particularly as income increases over the course of a career. Patience is also important, as even starting with no money and investing towards a goal of $1 million, halfway through the investment period the investments may only be worth around $125,000. However, this is due to the effect of compounding, which can be explained further by a financial adviser.