Financial planning for your personal circumstances
Written by R. A. Stewart
“No one shoe fits all sizes” is a saying which is applicable to financial planning. No two people are the same. Personal finance needs to be tailored to one’s personal circumstances.
There are several factors which need to be taken into account when deciding what to do with your money. The one factor which covers all of your circumstances can be summed up in two words, “Risk Profile.’
Your risk profile is the amount of risk which you can comfortably cope with. “If there is a financial meltdown, would it affect your lifestyle?” is a question which needs to be asked, before you commit to investing in such and such.
Your timeline is one of the factors which make up your risk profile. The longer your timeline, the more time you have to recover from a market meltdown. When you are young you are able to invest more aggressively into growth funds, but that does not mean that you should invest every single dollar you own into growth funds because it all depends on what the purpose of the fund is.
You may be young and have some money invested in growth funds, some in balanced funds, and some in conservative funds.
Everyone has different goals and different living arrangements, which mean that your financial plan must be set according to your personal circumstances.
Setting goals is important. It gives you a destination to travel to. Without goals life will take you where it takes you.
There are three categories for goal setting:
Long-term goals (over 5 years)
Medium-term goals (1-5 years)
Short-term goals (up to 12 months)
A long-term goal can be savings for your retirement or a house deposit.
A medium-term goal can be saving for an overseas holiday or a car
A short-term goal can be saving for an emergency fund.
Growth funds are ideal for long-term savings goals.
Balanced funds are ideal for medium-term savings goals
Conservative funds are ideal for short-term savings goals.
Your tolerance to risk is a factor. There is no point investing in something if the possibility of loss is going to give you sleepiness nights. Having said that, successful investors learn to take a financial hit without losing heart. They learn the lesson and apply it to future investments.
During covid, the markets went through a bad spell. Many Novice investors switched from growth to conservative funds. The markets recovered and these investors turned a temporary loss into a permanent one.
The moral of this is to plan and stick with your plan because if you have invested according to your risk-profile then what the markets are doing should not be an issue to you.
People make different choices, some make right choices and others make wrong choices. It all leads to different outcomes. If you want a different outcome to what you have been getting then make different choices. It is as simple as that!
All the best.
ABOUT THIS ARTICLE
This article is of the opinion of the writer and may not be applicable to your personal circumstances, therefore discretion is advised. You may use this article as content for your blog/website or ebook.
Read my other articles on www.robertastewart.com
Explore Freely, Spend Wisely: The Ultimate Travel Companion
For the ultimate freedom to explore these incredible routes, get a Wise Travel Card. One card holds multiple currencies, letting you pay effortlessly in NZD for fuel, snacks, and accommodation. It automatically converts your money at the mid-market rate, saving you from costly bank fees. Top up and manage your funds instantly via the app, making it the smart, secure, and simple way to travel. Spend like a local and focus on the scenery, not the small print. Get yours and travel with ease.
https://wise.com/invite/dic/roberts10486
