From Plan to Strategy

In previous newsletters, we have discussed the first two stages in Money Planning – knowing where you are now and deciding where you want to be (and when).  The next step in the process is to develop some ideas about different strategies you may adopt to get from your current situation to your desired future state and the pros and cons of each possible approach, in order to make an informed decision about your preferred strategy.

To use our earlier example, if you were planning a holiday, you may have the option of travelling by car, train, bus or plane, and each alternative differs in terms of the cost, the amount of time taken, how much flexibility you have and how it matches your personal preferences.  So you would be able to evaluate the alternatives based on these factors, and of course, the amount of money you have available, in order to decide on the “best” form of transport, i.e. the most suitable for you given your current circumstances and objectives.

From a Money Planning perspective, there are many options available which offer long term wealth creation, and they also differ in their characteristics, including:

• their upfront and ongoing cost in terms of both time and money,
• the extent to which they can be funded with borrowed money ( or “leverage” ),
• their anticipated return in terms of their growth in value and any income they may provide, as well as the variability of the return over time ( referred to as “volatility” ),
• any Income Tax or Capital Gains Tax implications,
• the level of risk of losing your investment, and
• the amount of knowledge or skill required.

Evaluating and weighing up these factors is essential to be able to decide on a preferred wealth creation strategy, and again it is all about selecting which approach is most suitable for you given your current circumstances and objectives.  The role of Money Planning in this decision making process is crucial – it will help to determine:

• your current financial circumstances, and available surplus cashflow,
• whether future cashflows are sufficient to continue to fund the desired approach ( after allowing for the all the committed and desired spending along the way ),
• the impact of leverage on the projected outcome, and
• most importantly, whether the anticipated returns are sufficient to achieve the desired outcome, i.e. creating the desired level of passive income in the desired timeframe.

This is where a sophisticated Wealth Projection modelling tool can really assist to see the potential outcome of a number of different wealth creation strategies, modelling the potential level of wealth generated, together with the underlying cashflows, and helping you to determine which approach is going to suit you best.

You can watch a recording of a recent webinar featuring Empower Wealth’s Wealth Projection modelling tool in action by going to https://ewwebsiteprod.wpengine.com/webinar and registering at the bottom of the page.  To get more of an understanding of the power of this modelling in action, we have recently released a DVD of one of our Wealth Forums held earlier this year.  If you would like to receive of copy of the DVD, please just send an email to [email protected] with “DVD Request” as the subject.

If you would be interested in seeing how these tools and techniques could be applied to your own personal financial situation, please come and see us for a free one hour consultation by registering at https://ewwebsiteprod.wpengine.com or just give us a call.