How do your life and career goals affect your financial planning?

On the surface, financial planning might appear a fairly simple exercise.

You establish income, expenses and set a budget that provides dedicated, tax friendly savings that will ensure a happy retirement and estate. However, comprehensive financial planning is an ongoing exercise that is impacted by change in tax policy, income increases and decreases, changes in career across various life experiences.

When one considers all these variables, and others, financial planning is an organisation of multiple moving parts that comprise our life story.

Periodically, we can enhance our financial plan by re-evaluating where we are in life, in our career and in our income and investment strategy. Simply put, when your personal goals and circumstances and professional goals and circumstances change — so does your financial plan.

Below are the most common observations made by financial planners:

Income can come from multiple sources. If a financial plan is based upon a specific career, which in turn leads to another career or advancement, the financial plan will change. The client must identify all potential sources of income and the financial planner can assist by citing possible income streams that the client may not recognise.

1. Tax policy often changes — Tax policy that affects direct income and take home pay can change. Taxes and employee benefits must be monitored and assessed on a regular basis. Many of these benefits can affect lifestyle. All financial planners differentiate between taxable income and non-taxable income and try to achieve the most favourable balance between the two that allows the individual to maintain their desired lifestyle whilst saving for the future.

2. Tax deduction education — Tax deductions must be known to the client and because they change periodically, the financial planner must advise the client as to any changes that could affect income or savings. Usually, these changes are published well in advance and the client and planner can change the direction of certain savings and investment strategies to maximise tax-free savings.

3. Career and education choices — Career choices, decisions to pursue additional educational degrees and changes in economic conditions can drastically affect an individual’s financial plan. The client and the planner must consider the full effect of these type decisions and circumstances.

4. How demand for certain skills affects income — The ever changing demand for certain skills can greatly change careers, education requirements and income potential. A good financial plan recognises this and allows for periodic skills and educational development. Achieving a solid financial plan is rarely a straight line, as every career decision affects the plan.

5. Earned income vs. unearned income — Every client should understand the differences and relationships between earned income, other income and lifestyle and savings. The client must understand how these interconnected conditions can impact their financial plan for the future and present. Most financial planners will spend long periods of time evaluating the client’s financial assets, property and transfer payments.

6. Personal earning goals and career goals — Very often individual have unrealistic personal earning goals. Certain career choices can make the personal income goal unattainable. It is the responsibility of the client and the financial planner to ensure that the client’s income expectations for the future have credibility. Sometimes, light revisions in a career path can have dramatic long-term benefits. In every instance, career choices affect income and therefore the financial plan.

7. Financial risks — One of the important functions of the financial planner is to identify risks that the client may not see. Are there holes in the career and income path described by the client? If so, what and where are they? People do not always want to recognise the potential weaknesses and risks in their career and personal goals but the job of the financial planner is to identify these laws and develop a strategy to mitigate the risks. One aspect of this evaluation is an assessment of how future technology might affect the client’s career.

8. Political and social conditions — The political and social conditions surrounding the client’s personal and career choices can play an important role in the individual’s overall financial plan. During the course of a career, social conditions and the political environment can change significantly. These elements can affect income and career direction. The responsible financial planner must consider the effect of these elements in developing an effective plan.

Our free guide to financial planning can help

A financial planner can help you to take all these points into consideration. In addition to protecting and building your assets, they can assist you with making the most of your investments and securing your family’s long-term future.

We’ve put together a guide explaining in more detail how a financial planner can transform the way you look at — and manage — your finances. Download it for free below.

How can a financial planner help you? – find out more