Getting Organised: The First Step Towards Financial Clarity

The first step in the financial planning process is gathering all the information needed to make financial decisions. Because this can take valuable time, people are often tempted to jump straight to the decision. This usually leads to suboptimal financial choices, some of which may be irreversible.

From our work with clients, we’ve learnt that making smart financial decisions is only possible when all the relevant information is available. For this reason, our relationship with new clients always starts with getting financially organised. Doing this well lays the groundwork for the clarity and confidence that always follows excellent financial planning.

From Chaos to Order

Many investors struggle with disorganisation. The overwhelming nature of scattered documents, unclear cash flow, and a lack of clarity about one's financial situation can take a significant mental and emotional toll. It's easy to feel trapped in a cycle of financial uncertainty, unsure how to break free and take control of your money.

However, hidden beneath the surface of this chaos lies the transformative power of financial organisation. Getting organised initially seems daunting, but every journey begins with a single step. We suggest that you start small and celebrate your progress along the way. Financial organisation is a skill that can be learned and improved over time.

One of the first steps in getting organised is to create a centralised hub for your financial information. This can be a physical binder, a digital folder, or a combination of both. The second step is collecting the documents, statements, and information that make up your financial life and saving them in your centralised hub.

By having all your important documents in one easily accessible place, you can quickly and easily reference the information you need to make informed decisions about your money. 

The Power of Financial Clarity

At the heart of organisation lies the power of clarity. When you take the time to gather and review your important financial documents and information, you create a clear picture of your current financial situation. This clarity is like a map, helping you navigate the complex landscape of your financial life with confidence and purpose.

With your financial information organised, you can gain a deeper understanding of your financial life. This means closely examining your income, expenses, savings, and investments and identifying patterns and trends that may impact your financial health. Are there areas where improvement can be made? Are there opportunities to redirect your resources towards your goals?

Financial clarity also enables you to set meaningful, achievable goals for your future. When you clearly understand your starting point, you can create a roadmap to guide you towards your desired destination. Whether you're saving for a new home, planning for retirement, or working to pay off debt, having a clear action plan can help you stay motivated, focused, and on track.

Taking the First Steps Towards Financial Organization

Financial organisation is like a beacon of light guiding you through the fog of financial confusion and illuminating the path to a brighter, more secure future.

The process and effort of getting financially organised may seem daunting at first, but the rewards are well worth the effort. When you commit to decluttering your finances, you're not just tidying up paperwork—you're laying the foundation for a more empowered, intentional relationship with your money.

We have successfully assisted countless families in this process, and we are more than capable of guiding you through the first step towards achieving the peace of mind from excellent financial planning.

Your Financial Prescription

The parallels between medicine and personal finance are noteworthy, as both require discipline, prudence, and timely actions. Just as physical health depends on preventative care and informed decisions, monetary well-being relies on sound financial habits.

While every investor has unique circumstances and challenges, it’s helpful to lay out the path for those who want to embark on a successful journey. As we navigate our financial journey, having a clear and precise plan is paramount. Today, we aim to provide just that with a well-crafted financial prescription. By mirroring a medical prescription, it aims to curb financial 'bleeding', stabilise your finances, and guide you towards sustained financial health.

Stop the Bleeding

The first step in any financial recovery is to "stop the bleeding". Addressing poor-quality debt is crucial in this phase. High-interest debts can drain your budget and impact your ability to save. Pay your debts promptly, prioritise them appropriately, and prevent unnecessary financial stress.

Another crucial element in stopping the bleeding is controlling your expenses to avoid "lifestyle creep". A conscious effort to live within your means and forego unnecessary expenses can preserve your wealth in the long term. You can take tangible steps to control your spending by setting a budget and consciously tracking it.

An emergency fund is an underappreciated but vital part of any financial plan. It acts as a buffer against unexpected expenses and enables you to sustain financial shocks without going into debt.

Lastly, insure yourself against unexpected health surprises. This should not be considered an "extra cost" but a necessity. With this safety net in place, you can prevent health surprises from derailing your financial plan.

Stabilise the Patient

Once you've effectively stopped the financial bleeding, it's time to stabilise your financial health. Begin by "paying yourself first". This principle encourages you to invest regularly and even slightly more than you feel comfortable with. Invest wisely into diversified assets.

Investing in global equities makes you a part-owner of the Great Companies of the World. You know these companies because you likely buy their products regularly. Owning a whole basket of them means you are diversified against any one company going out of business.

Make sure you understand what tax breaks are available to you. In most countries, this will be pensions and tax-free investment accounts. These offer valuable opportunities to increase your saving and investment potential.

Path to Recovery

Having stabilised your finances, the focus now shifts to long-term financial recovery and wealth building. This involves updating your financial plan at least annually. Regular updates ensure your plan adjusts to life changes and market fluctuations.

Become a person who acts proactively rather than reacting emotionally to world events. Responding to market noise can lead to poor investment decisions caused by panic or euphoria. Instead, maintain a long-term perspective and let your financial plan guide your actions.

Understanding the financial side effects of being a long-term investor, especially market volatility, is paramount. Familiarise yourself with the idea that markets fluctuate naturally and that temporary declines are to be expected. A diversified portfolio can help insulate against these declines while benefiting from long-term market growth.

A Well-trodden Path

The journey to financial success will require hard work and dedication, but it is achievable. There are no shortcuts to success, but every successful investor has walked the path laid out above. By following the above prescription with consistent action and discipline, you’ll be well on your way to achieving your cherished financial goals.

A Life Lived on Purpose

It's easy to forget that money is a means to an end, not the end itself. Having a healthy interest in money is great, but overly focusing on it can distract you from its real purpose. One way to view money is as ‘fun vouchers’, if it can’t be enjoyed what’s the point. Money is also a tool to help others, whether they be dependent family or someone in need. Research conducted by Bronnie Ware, an Australian palliative care nurse, found that out of the top regrets of the dying, money did not feature in the top 5. She commented on the clarity of vision that people gain at the end of their lives, a clarity so often missing from those who are healthy.

The top 5 regrets she uncovered were:

1. I wish I’d had the courage to live a life true to myself, not the life others expected of me.

2. I wish I hadn’t worked so hard.

3. I wish I’d had the courage to express my feelings.

4. I wish I had stayed in touch with my friends.

5. I wish that I had let myself be happier.

Lifestyle, Not Numbers

The things we will most likely regret relate to the way we lived, not the money we didn't make or didn't spend. On our deathbeds we will lean heavier on our human connections than our financial connections.

While financial planning requires various numerical inputs, it's vital that those numbers are linked to a desired lifestyle and not a desire to reach an arbitrary level of wealth. You may not call yours a 'bucket list', but it's likely that there are things you would like to do that you haven't got around to yet. What are you waiting for? They may range from a simple thing like trying a new form of exercise, to larger dreams involving long-distance travel. The important thing is that they are being thought about and planned for. When was the last time you ticked something off your list?

You'll remember the things you did and the places you went, not the investment charts you gazed at.

The Great Tradeoff

Good financial planning is about balancing the competing forces of planning for tomorrow while still enjoying life today. The past 18 months have changed how many people view this tradeoff. While it was always true, it's now more apparent than ever that we don't know how many tomorrows we'll have.

Some financial professionals have convinced clients that tomorrow is always more important than today, leading to a prioritisation of the future at the expense of living a meaningful life in the present.

While in some cases the situation calls for this extreme position, it greatly oversimplifies the concept of "saving". Often reduced to only the money you have to invest, it neglects to take into account the other forms of capital we have at our disposal. These include our time, our energy, and our talent. A more comprehensive and balanced approach is what we need during this time of great upheaval. Does your plan include the ability to do the things that will bring meaning to your life now, or are you only focused on the future?

What Will You Change?

While the world is still not back to "normal”, and never again may be, we encourage you to reflect on the second chance that the pandemic has given us to calibrate what really matters to us. The restrictions placed on our freedom of movement highlighted the activities and people we most missed, as well as the things we had put off doing.

What did you take for granted? Who did you miss? What did you not get to do? Who did you not get to be? As the world opens up, we encourage you to take action on your plans. Life, as we all know, is certainly for living.