DIY Financial Planning

Earlier today I met with a woman who I have not been able to get out of my head ever since.  Let’s call her Shirley.  Shirley is 40, she is married with 2 young children and suffers from ill health.  Sadly, her mother recently passed away and left her a fairly significant inheritance.  After paying off debt, there is a rather large amount available to invest.  In my mind, the steps for Shirley are fairly simple:

  1. Set up a household budget,
  2. From the income they currently have (husband’s wages and Centrelink benefits), determine if they have any money available to save, if they have just the right amount to meet their day to day living needs or if they need additional income to meet their day to day living needs,
  3. Set out their short, medium and long term goals. Including additional items they want to include like holidays, through to long term retirement plans
  4. Prepare a ‘financial plan’ including where to invest their money, what accounts they need to set up and what savings/income generating strategies they need to achieve each of their goals and or prioritise their goals if they are unable to achieve all that they have set out to achieve.

Shirley had not thought that we would be talking about all of these points, instead she just wanted to know how to invest her money.  She soon realised that determining how to invest her money is 100% dependant on what her money needs to be doing for her and her family.

family-drawing-on-chalkboard_slideshowShirley quickly saw the benefit of having a ‘financial plan’ as well as the benefit of using a qualified financial planner to help her prepare and implement a financial plan for her family, as she is intent on making the most of the legacy her mum has left behind for her.  However, her husband’s parents do not trust investments or financial planners and keep all their money in cash at the bank.  They have subsequently imprinted their distrust of investments and financial planners on their son, so Shirley’s husband doesn’t want to work with a financial planner or more importantly pay a financial planner.

I likely understand better than Shirley why her in-laws are sceptical about investments and financial planners.  If they have never invested money in shares or property or been to see a financial planner and all they have ever heard about either comes from the media, they are likely to have a poor opinion.  Unfortunately, the media focus a lot on bad news, particularly from the share market and like any field, Financial Planning has had a number of bad apples in its time.  It is these planners that give the rest of us a bad name.

So, how can Shirley convince her husband that he needs a financial planner?  I suggested to Shirley that she should first convince her husband that they need a ‘financial plan’ and then they have 2 choices:

  1. They build their own financial plan and implement it themselves. Having a financial plan is better than not having a financial plan, but they also need to dedicate some time to preparing it properly and giving it due consideration, OR
  2. They can pay an expert to help them. They gain access to the wealth of knowledge that the expert has built up over years of continuous studies.

I really wish that I could do more for Shirley, but for now it is in her hands.

What do you think Financial Planning is?  Do you feel confident doing it yourself or would you rather pay an expert to do it for you?