What is your financial plan for 2022?

What is your financial plan for 2022? Do you have a financial plan and will it help you achieve your financial goals? It is interesting speaking to people over the years and hearing their thoughts on it. Personally, I have been an expat for twenty-six years and the reason for my continued success and that of my clients is I plan. Remember the six P’s “Prior Planning & Preparation Prevents Poor Performance. 

What are your financial goals?

Step 1: What are your financial goals?

The first step in looking into your financial goals is to look at what you ultimately want to achieve and what your financial goals are. For example, some common financial goals I hear from clients include buying a home, paying off debt, saving for retirement, or their children’s future. 

If you want to actually achieve your financial goals however then you need to make a plan and in the words of Tony Robbins, take massive action. For example, if your goal is to lose weight, then it’s not enough to simply join a gym. You need to then make a plan to go on a regular basis and build that into your regular routine until it forms part of your daily habits. 

Friday 14th January this year is the date most people give up on their “New Year’s Resolutions”. So, who are the people that stick to their plans? Who are the ones that are successful? It is quite simple, the ones that are successful are the people that sit down and plan.

When I sit down with clients to do a discovery session, one of the first questions I ask is what are their financial goals.

Considerations: Financial Planning as an Expat

For many expats, a life overseas represents an amazing opportunity to live in a different country, with activities, travel and experiences they would not have at home, and for many also represents an opportunity to save and invest for their future. 

However, one of the leading banks did a survey a few years back interviewing expats in Dubai and it showed that eighty percent (yes, 80%) of expats will leave Dubai with the same amount of money they came with or in some cases a lot less.

It is so easy to get caught up living the amazing lifestyle on offer and forget to save to achieve your financial goals. Brunches, fast cars, yachts, holidays to the Maldives, etc are amazing, however, many people do this without first committing to a financial plan and putting aside the amount they have committed to saving first and therefore end up living paycheck to paycheck and not saving anything. 

So how do you solve a financial planning problem? Simple, first ask yourself why are you an expat? What was your reason for packing your suitcase to start a life living in a foreign country? For me it is and always has been simple;  to better my life by understanding what I want for my future. Personally, I want to retire at 60 (not 67 which is the standard UK retirement age) and I want to enjoy my retirement by visiting my kids, going on holidays, and enjoying a debt-free lifestyle that affords me to do what I want when I want. 

To make my retirement plans happen, I have implemented a retirement plan and my first step is to budget so I can see what I am spending a month to month and year to year and adjust accordingly. I always allocate a minimum of 20% of my salary towards my retirement and this is why I feel comfortable knowing where I am in my current financial plan, and more importantly where I am in my retirement goals.

Conducting a Financial Review & Developing a Financial Plan

Step 2: Conducting a Financial Review & Developing a Financial Plan

Having a financial plan in place is so important and it helps assess your current financial situation along with setting up your goals. However, before putting together a financial plan, it’s important to first understand your existing financial position. When sitting down with a new client, we go through all of their financial obligations, objectives, income, and expenses. We then align these to a client’s financial goals and develop a plan accordingly. 

You should keep track of your financial position and review it on a monthly basis to make sure you are on track and if you have an advisor then you need to be sitting with them once a quarter to make sure you stay on track. 

As a qualified holistic financial advisor, I look at a client’s overall financial position, taking into account things like estate planning, retirement goals, tax considerations and insurance. Once a quarter, clients should sit with their financial advisor to make sure they are on track with the goals.

Another key consideration when looking at your financial plans is the power of both inflation and compound investment. With the cost of living levels increasing rapidly worldwide, it’s essential to ensure that your investments are able to keep up with inflation levels as this can be the biggest destroyer of your future financial purchasing power.

What is a Financial Plan?

A financial plan is a plan that tells you where you are right now financially, what your goals are looking ahead, and what areas or issues need to be addressed so that you can meet those goals. The plan covers every aspect of your financial life, from investing, budgeting, protection retirement, and of course succession planning and taxation. Everyone’s starting point in developing their plan will be different based on their age, income, debts, and assets, the most important components of a financial plan are the same. 

If you’re not sure what’s included, below are some things you need to think about:

Reaching certain milestones, such as getting married or having a baby, are obvious reasons to reshape your financial plan. If, for example, you have younger children, you need to think about how saving for university fits into the picture. A twenty-something who’s recently got married, on the other hand, maybe more focused on saving enough money for a down payment on a first home. “Empty-nesters” as we call them mainly look towards their retirement as a life event and this is important to focus on that goal.

It is easy to be a momentum investor, you know that person who purchases investments that have been showing an upward price trend. But is it easy to holistically look at your portfolio and understand what you actually need to achieve? Is $250,000 enough to retire on? Usually, $250,000 would really only provide a 5% drawdown of $1041 per month.

Life & Critical Illness Insurance

Financial planning also means protecting your assets and making sure you have the right insurances in place should something happen. If you look at the surveys done over the past couple of years more than 74% of people here in the UAE don’t have any insurance and over 90% don’t actually have the right insurance or enough in place.

Take Action and Implement a Financial Plan

Step 3: Take Action and Implement a Financial Plan

My key takeaways of things that you would need to have in your financial plan are:

  • Create an emergency fund with cash reserves to cover at least 3-6 months expenses
  • Do a monthly budget and review this regularly
  • Understand your financial goals and what they are
  • Know the cost of inflation & understand how it affects your finances
  • Invest don’t just save
  • Have protection in place in the form of insurance
  • Monitor your portfolio performance regularly ensuring it’s achieving your financial objectives
  • Look at both tax planning and succession planning

Now is the time to kick start your 2022 financial plans. Follow the above advice and if you would like some assistance with any of the things mentioned above or a complimentary financial review then get in touch. Make sure that rather than making this a quick fix diet for 2022, ensure that it becomes a long-term financial plan to help you achieve financial freedom. 

“I believe that the biggest mistake that most people make when it comes to their retirement is they do not plan for it. They take the same route as Alice in the story from “Alice in Wonderland,” in which the cat tells Alice that surely, she will get somewhere as long as she walks long enough. It may not be exactly where you wanted to get to, but you certainly get somewhere.” ― Mark Singer