The Six-Step Financial Planning Process

With the increasing pressures of work in Japan, it seems that we have less and less time to devote to running our personal lives and nowhere is this more evident than in our personal finances. One way to make the best use of what time you can devote to your finances is to consult with an International Wealth Manager, not only will this bring you peace of mind but it will free up more of your time to pursue more pleasurable activities or, if you are the other way inclined, spend more time at work!

So, let's start with the most fundamental question on the subject, why do we need wealth management in the first place?

Well, to answer a question with another, how many people do you know or have known, who have achieved all of their financial goals? The chances are that it is a small number indeed. With the exception of the few who become wealthy and financially independent in time to enjoy their good fortune, whether through business acumen or the benefit of a windfall or inheritance, most of us will have to devote the majority of our lives to achieving our financial goals. Financial planning is essential to help us to get where we want to be, when we want to be there and in the most efficient way possible. This should be done with the least risk and using the resources to hand, or to use a more formal definition:

"Personal Wealth Management is a process which involves identifying needs and objectives, establishing priorities and implementing options to help achieve those objectives"

• Failure to establish well defined goals and objectives.
  The old adage "If you aim for nothing, you'll hit nothing" is all too true.
  
  
• Failure to devise and implement a formal plan designed to hit these goals.
  Another hackneyed phrase illustrates this perfectly and we all know that "most people don't plan to fail, they just fail to plan".
  
  
• Failure to identify and mitigate risk.
  Two types of risk exist in respect to financial planning:
  
  
  • Financial risk.
    Assessing your attitude to investment risk and volatility, ensuring realistic returns and protecting capital are the keys to establishing a sophisticated, long term investment strategy.
    
    
  • Personal risk.
    The effects of a premature death or long term illness or disability are often financially catastrophic and must be assessed and understood in order for a realistic financial plan to be established.
    
    
• Taxation.
  This is not just a matter of minimising your current taxes, but most importantly ensuring that the financial and investment structures you establish for your future are as tax efficient as possible in order for you to keep hold of your investments and maximise returns.
  
  
• Flexibility.
  Even the best laid plans will come to naught if you do not monitor your progress and adapt your plan to external changes (the economy, inflation and investment returns) as well as those in your life (family, job, location).
  
  
• Procrastination.
  We have all regretted delaying a financial decision at some point in our lives. The decision to put some order into your financial future and to take sensible steps towards achieving your financial goals should not need a decision. Why delay?
  
  

In common with business planning, personal financial planning has a process and review cycle. This cycle, with 6 fundamental steps, is shown below. Together these steps will help you to overcome all of the obstacles that prevent many people from achieving their financial goals:

Every month in this column I will recommend that you consult with an experienced International Wealth Manager, so in my next article, I will take you through the financial planning process step by step with a few practical hints along the way to help you.

Ivan Doherty is an Account Manager with Towry Law International (Japan) Ltd. who has 12 years experience in providing Independent Financial Advice to both individual and corporate clients.
Towry Law International is registered with the Ministry of Finance in Japan and is Asia's largest Independent Financial Adviser with 31 offices worldwide. It was International Money Marketing Award Winner in 1999 and 2000, and has won awards for Best Intermediary of the Year, Best Investment Intermediary of the Year.

More in this series: 1 | 2 | 3 | 4

Contact Ivan Doherty by email