DIY financial planning

The financial planning industry can cop a pretty bad rap. Some people leave with a bitter taste in their mouths, angry that their financial planner couldn’t wave a magic wand and turn them into a millionaire. Others tell tales of the fraudulent fleecing of life savings – although whether these are true stories or urban myths is not always clear.

A 2015 study by Roy Morgan found that only 24% of Australians trust financial advisers^*. With confidence so low, it’s little wonder that so many people think about becoming their own financial planner.

Before we go any further, let’s be clear about one thing. By and large, financial planners are good people. They are qualified professionals with your interests at heart, who can help you with investing, superannuation, retirement planning, estate planning, insurance and taxation. These are big, complex topics that can really benefit from specialist advice.

While they won’t make you rich overnight, financial planners can do plenty of things to safeguard you and your family from any nasty financial surprises. Just make sure you find a trusted adviser from a reputable source like the Financial Planning Association of Australia before you hand over your bank details.

Setting out your goals

One of the hardest things that we humans struggle with is planning for the future. It can seem ludicrous to put money away for a retirement nest egg when you’re in your early 30s. After all, you’re probably madly saving for a deposit on a house and may have a young family to support.

But a little forward-thinking and goal-setting is critical if you’re going to DIY your financial planning. Otherwise, it’s too easy to get lost in the moment – only to come back to it a decade later lamenting, “Why didn’t I put $100 a month into that investment fund?”

In setting out your goals, think about where you want to be in one year, and also 10, 20 or 40 years’ time. It may be that you want to pay off a credit card debt within 12 months; or own your home outright in 10 years; or have a property portfolio with at least three investments in 20 years.

Know what you’re dealing with

If you’re going to manage your own money, then you need to know a bit about what you’re dealing with. For example, life insurance can be a grey area for some – how do you know how much is enough, and what type of life insurance products you need?

The same goes with investments. If you’ve got some money that you plan to invest in either shares, cash, fixed interest or property, read up on how you can invest your money in the most effective way. This includes working out your risk profile – are you prepared to put your hard-earning savings in a high-risk investment over the long-term, to potentially reap higher rewards down the track? The MoneySmart website has some good tips on how to invest smarter.

And what about superannuation? Are you putting enough away each year to ensure you’ll have a comfortable retirement? And are your super savings in the right asset classes to maximise your returns?

As you can see, these can be complex topics. The good news is that there are many resources online to steer you on your DIY financial planning journey.

Start with the basics

Your first step in DIY financial planning is to sort out your finances in the here and now. Work out your net financial position by subtracting any debts (credit card, mortgage, etc) from your total assets. Then take a look at your monthly budget and see if there is any spare change to play with.

If it’s looking a little doom and gloom, don’t despair! At least you now know exactly where you stand. Use this knowledge to set down a firm plan for the future – which may include finding a better deal on things like your home loan, credit card and insurances so you can save a little extra each month.

Our team at iSelect have partnered with Lendi*, so we can help you compare a range of different providers on the market. Use our online tool to compare home loans, or give Lendi a call on 1300 186 260 (08:30-18:30).