Importance of planning

Most people experience stress and anxiety from time to time. These feelings can be triggered by various circumstances and factors, one of which can sometimes be linked to a lack of personal financial planning.

When it comes to managing horses at an individual level, you might have a good plan, and if something goes wrong, there is no shortage of experts to whom you can turn for advice.

However, you may be reluctant to discuss your personal financial matters as you may feel out of your comfort zone when dealing with topics you lack familiarity with, or putting a financial plan in place is low on your list of priorities, when faced with the daily challenges of your business and career.

The lack of a financial plan can cause anxiety and stress, regardless of your financial position. Sometimes having an excess of assets can present more challenges than having too few of them.

Do you have a personal

financial plan?

From a personal financial planning perspective, it is crucial that you take a step back every now and again and think, not just about your business or career, but about your own financial future. The two are linked, of course, but they are not interchangeable. A good financial plan should serve as a roadmap towards your individual financial goals, and it will also assist in relieving the stress around managing personal finances.

Where to begin?

A personal financial plan will incorporate aspects of investment, tax, structuring and protection, bringing these elements together in a way which suits your individual needs. But with so many things to think about, where do you start?

The following are the key steps in the financial planning process. They apply regardless of your age, career, business structure or current financial position.

1. Identify your financial goals

The goals are your destination and the plan is your roadmap. Identifying your goals involves asking questions such as:

  • What type of income stream do I need to fund my lifestyle, now and in the future?
  • Is my business or career structured optimally from a tax perspective?
  • If I sell my business or change career, are there other sources of income available to me? Should I invest some of the capital?
  • How am I positioned for retirement? What about my spouse / partner / children?
  • What will happen in the event of illness or untimely death?
  • Will my business or assets be passed on to the next generation? How should this be done and what are the tax consequences?

    • It’s worth bearing in mind that not all goals will have the same timeline or level of importance; for someone younger, the key concerns may be paying down debt or building up a savings fund. If you’re approaching retirement age, the transfer to the next generation and the investment of surplus capital may take priority.

    2. Set an appropriate investment strategy

    Once you have identified your goals, the next step is to devise an investment strategy which gives you the best chance of meeting them. Goals-based investing aims to align each goal with an appropriate strategy, reflecting your personal risk and return objectives.

    3. Be Tax Smart

    Managing tax has become more complex and difficult in recent years, and it is important you are not only aware of the tax consequences of any course of action you may take, but that you take advantage of any tax reliefs or exemptions that may apply to you and your business.

    4. Plan for unforeseen events

    The fourth step involves planning for unforeseen events, such as serious illness or premature death. Quite understandably, we often put off thinking about issues like this – however, it is necessary to consider the impact on your family and business if you were to pass away suddenly or become too ill to work.

    For others, there may be concerns around how children would meet an inheritance tax bill further down the line.

    Financial protection is the ‘safety net’ of financial planning, in that it seeks to pre-empt, or plan financially for such scenarios.

    5. Review regularly

    Putting a financial plan in place and identifying any action points for the short, medium and long term should help give you peace of mind that you are making progress towards your financial goals.

    Nevertheless, it is important to regularly review your plan – at least annually and as and when there are changes to your personal circumstances or to the investment, tax or regulatory environment in which you operate.

    A good financial advisor should be able to tailor a financial plan bespoke to you and your family, and to provide a roadmap to fall back on when the uncertain challenges of business and career can cause stress.

    David O’Brien is a Director at Davy, Private Clients and an active participant in the equestrian sector. He works with business owners to provide best-in-class financial planning, investment management and asset selection. You can contact David directly on 01 614 9123 or email him at david.obrien@davy.ie.

    Davy Private Clients is a division of J&E Davy. J&E Davy, trading as Davy, is regulated by the Central Bank of Ireland.

    *Please note that this article is general in nature, and does not take account of your financial situation or investment objectives. It is not intended to constitute tax, financial or legal advice and is based on Davy’s understanding of current tax legislation in Ireland. Davy does not provide tax or legal advice. Prior to making any decision which may have tax, legal or other financial implications you should seek independent professional advice. There are risks associated with putting any financial plan or strategy in place. The value of investments may go down as well as up.