Navigating Uncertainty: Why Values-Driven Financial Planning is Key.

Financial planning is often seen as a task to be completed. As our financial situations grow more complex, many of us reach a point where we think, “It’s time to hire a professional.”

?When you meet with a financial adviser, the first question might be, “What are your financial goals?” It sounds logical enough, and you might respond, “I guess retire at 65, travel more, invest smartly, and pay off the mortgage.”

But is “What are your financial goals?” the best place to start? I don’t think so. In fact, it can be the wrong approach.?

Consider this: Why retire at 65? What if you could transition to part-time work at 60 and still maintain your lifestyle? What if an unexpected opportunity arose that could change your financial situation entirely? Why retire at all? Is retiring at 65 really a goal, or is it just an assumption you’ve adopted?

Beginning with rigid goals can actually be counterproductive. It might steer you in the wrong direction from the outset.

James Clear in Atomic Habits draws on a well-known analogy regarding the compounding effect of small changes. He compares life to a plane journey, where even a small shift in direction can lead to a very different destination. This concept applies to financial planning as well. Setting the right course is crucial, but so is making adjustments along the way to ensure you stay on track. Without these course corrections, you might find yourself far from where you intended to be.

The key is to think more about the values that drive your financial decisions rather than fixating on fixed goals. It’s about setting a general direction aligned with what matters most to you.

For example, I’m not sure exactly what my life will look like in 20 years, but I know I want to ensure I have the cash flow to spend as much time with my family as possible, have the freedom to move as and when I please and create meaning in the lives of others so that I leave the world in a better state than I found it.

Understanding your current and future cash flow is critical. When will you need to draw from your investment funds? Can you wait for KiwiSaver and Super to start paying out? Will that be enough to support your lifestyle? When would be best to sell your business or hire someone to replace you? Your financial plan should be a carefully managed network of income sources, derived from an asset pool and balanced against living, as well as planned expenses.?

A good financial adviser will help guide you through these values and time-based decisions. You might decide to prioritize your child’s education fund for a few years, which could mean temporarily scaling back on other investments.

Financial planning is really about making informed choices and prioritizing what’s important to you. As advisers, our job is to help you build accurate cash flow statements, balance sheets, and investment strategies that align with your values. It’s hard to see how any adviser could offer sound investment advice without first understanding your cash flow and the principles that matter to you. Financial advice that doesn’t consider the whole picture isn’t true planning.

Lifetime Cashflow Modelling looks at each year of a person's life and tries to understand what income, expenses, assets or investments might be occurring. It projects this out year-on-year to your age 100. Along the way we can model changes to any of those inputs to represent your plans. The more accurate the information is, the better the projected model will be. So, it will be important to continue to revisit this and update it over time to make sure you are financially on track. Where information changes, we can update the cashflow modelling and consider whether strategic changes need to be made. This becomes even more important when the income tap is turned off.

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Life isn’t predictable, and your financial plan shouldn’t be static. Markets change, and unexpected life events—like a global pandemic or the loss of a loved one—can dramatically alter your financial landscape. Proper financial planning is an ongoing process, requiring adjustments along the way. It’s not a one-time task to tick off the list.

By focusing on a values-driven approach, you and your financial adviser can ensure your financial plan reflects what’s most important to you. Small adjustments over time can make a significant difference in where you end up.

?Goals-based planning is too rigid for the uncertainties of life. Scenario planning offers a more flexible, adaptable path for managing your financial future.

At Financial Wellness Group, we put the horse before the cart, by following the following process, which we believe makes us different to most:

• We work with you as a guide, rather than the expert telling you what we think is best for you
• We follow a Values-based approach to help you uncover what's most meaningful to you
• Using sophisticated planning software, we create a live, rather than static plan which shifts and shapes as your life does.
• The plan is centred around your Lifetime Cashflow Modeling rather than rigid goals and endless 'What ifs'
• Our approach to strategy design is based on scenario modelling rather than goals-based planning.
• We deliver real value with immediate wins, rather than producing convoluted plans based on hopes and dreams.
• We continually review your strategy with you to ensure you to stay on track or reiterate and correct as life happens.

So, take a moment and think about one small step you can take right now to move yourself closer towards your most meaningful life.

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