Would you ever leave the front door of your house without having an idea of your final destination?
Whether you are heading to the office, a trip to visit a loved one, dinner with friends or your favourite pastime, you normally would have a plan when you leave the house. If you didn’t know where you were going, you wouldn’t know how to get there.
Having a financial plan is the same, like the sat nav to your destination. Having a clear understanding of where you are now (your income, expenditure, assets and liabilities) with the goals for the future (your destination) we can help identify and map out what needs to be done to get achieve this.
Cashflow planning can help you make better financial decisions now and in the future. It will help you identify your personal numbers. By taking the time to plan your cash flow, you can improve your financial stability and achieve your financial goals.
When we develop your financial plan with you, we build in contingences to ensure your journey is as smooth as possible. There are various external factors that can affect your journey:
- Legislative changes, like pension flexibility.
- Changes in your business.
- Changes to your personal circumstances.
- Changes in the market/economic environment.
Together and using assumptions, we can plan for these contingences. That’s the easy, logical part for us. The problem is when human EMOTIONS become involved.
We can’t do anything about our emotions and because they are hard wired into our psychology. However, if we are aware that emotions are the biggest hurdle in our financial journey we can build in strategies to limit the loss of wrong decisions and timing. We all default to making decisions taking into consideration emotion but if can make ourselves aware of the detriment this has on our journey we can ensure we have the best chance of achieving our goals.
The cost of human emotion is huge. According to the leading study on investor behaviour in the US for the past 28 years (Dalbar’s Quantitative Analysis of Investor Behaviour report (QAIB)), the March 2022 study found that that average equity fund investor earned more than 10% less than the S&P 500 (Standard & Poor’s 500). That could be the difference between retiring sooner rather than later or taking the extra holiday.
At Totality Wealth we help you to ensure that you don’t fall victim to the behavioural gap. We hold your hand through your journey and have developed our processes to take our behavioural biases into consideration.
