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Why Having a Financial Plan is Important


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Have you ever gone to the airport with your bags packed and boarded a plane without having any idea where it is going? As much as we might miss air travel now, it is unlikely we would board without knowing the destination. It is hard even to pack properly without knowing where we are headed, or for how long. The same applies to our finances. We need to know where we are going before making decisions about how we are going to get there.

Often, I meet clients who have accumulated various investments over the years; A few energy company shares from when they were released, an investment property they purchased a few years back that’s paying off the mortgage, a term deposit and some cash in the bank maybe. All of these things are great, but they have been purchased or accumulated without any real plan or goal in mind; they’ve packed a bag full of random things.

Why did you buy that investment property? Did you want to be a landlord? is it because you have estimated the capital return to be a certain amount each year and know that this is going to get you closer to achieving your long-term goals? Probably not. It is more likely you bought that investment property or those energy company shares because you heard that other people were doing the same and thought it would be a good idea.

Buying investments, be that property or shares or bonus bonds (in the past), or anything else we have bought along the way without having a goal, is like trying to pack a bag when we have no idea where our plane is headed, or for how long.

We might get lucky, and pack exactly the right things. We might be close enough and be able to pick up a few extra things when we get to our destination. Or, we might have packed completely the wrong things and get to our destination ill prepared.

Over time, our plans and goals will change. The closer we get to our financial destination though, the more certain we will be about what outcome we need. Even years away from that destination, it is important to have a plan, so we know whether we are on the right track or not.

Here are some things to think about:

  • How long do you want to work for? Do you want to stop work completely at a certain age, or would you ideally like to wind down to retirement?
  • How much do you think you are going to need to live on when you do stop working? A good way to work this out is to look at all your current fixed outgoings (rates, bills, fuel, car maintenance, groceries etc.). Then have a think about what else you are going to want. Do you want to travel? Do you want to eat out occasionally? Add these additional costs on top of your fixed outgoings and you’ll have a rough idea of what to aim for.
  • Are you going to need to need a lump sum of money at some point? This could be to pay off a mortgage, purchase a motorhome or new car, help your children out or anything else. In addition to a regular income, do you need anything extra?
  • Do you want to leave anything to family on your death, or are you happy to spend it all in your lifetime?
  • Can you access all your money when you need it? KiwiSaver becomes available at 65, so if you would like to retire before then, you will need other money to see you through until you can get your KiwiSaver. If you have an investment property, is the rental income enough for you to live on, or will you need to access the capital tied up in the property at some point? If you need to access the capital, then is an investment property the right thing for you as you may have to look at getting a mortgage in retirement if you do not want to sell?
  • What is on your bucket list? Too often, I see clients leaving these things far too late, rather than provisioning for them to happen at an earlier age. If you have bucket list items, factor in the cost of checking them off at an appropriate age.

As a financial adviser, investing people’s money is not the most important thing I do. Rather, it is helping them clarify their goals and ensuring they can do as much as they want to in their lifetime without running out of money. The earlier we know where we want to go (although this of course, may change over time), the easier it is to get ourselves sorted financially and invest in the right things that are going to meet our requirements.

If we know where we want to go, it’s a lot easier to make sure we are packed correctly for the journey.


This article should not be considered to be personalised financial advice. has some brilliant calculators which can help you work out where you’re headed financially. If you would like to arrange a meeting to discuss your personal financial situation, then please contact us to arrange an appointment.