Financial planning strategies and secrets: how to boost your wealth

Aussies wanting to grow their wealth may benefit from learning these top tricks. See how you can make some big bucks.

Financial planners are no stranger to criticism or controversy, but for every bad experience there are many great advisers making big bucks for their clients.

Some advisers’ strategies are barely known but extremely powerful, and sharing their secrets and strategies can help deliver Australians a brighter financial future.

In his new book Smart Money Strategy, financial planner Luke Smith says first consider your own personal “why”.

“Your ‘why’ is simply your goals,” he says.

‘Many times as a financial planner I’ve sat around a table asking clients about their goals. Often they’ve never defined them for themselves or with each other.”

Goals can change, and as they do your strategies should also change, Smith says.

Advisers are getting harder to find, with some businesses now closed to new clients. Before the financial services royal commission in 2017 Australia had about 40,000 financial planners, but that has since dropped towards 15,000.

Here are six secrets behind adviser-assisted wealth.

1. BIG PICTURE PLANNING

While consumers and investors focus on their next wage or the latest stockmarket swing, advisers work on a time frames spanning many years, often decades.

MBA Financial Strategists director Darren James says advisers help people identify “what they want their life to look like”.

Big picture planning “is a cornerstone of what we do”, he says. This can include superannuation, retirement strategies, saving for homes and other lifestyle goals.

Financial planner Luke Smith says consider your own personal “why”. Picture: Supplied

2. RESPECT YOUR EARNINGS

Smith says many people take their next pay cheque for granted and never think about its long-term impact.

“Let’s say you earn $80,000 a year on average over your working life. Over 42 years – from age 18 to 60 – that equates to $3.36 million in earnings,” he says.

“If you think about that for a moment, you might actually do something differently and start sooner.”

3. RISKY BUSINESS

Everything in life comes with risk, Smith says.

“Think about the risk as well as the rewards,” he says.

“The secret to a good risk strategy is identifying the facts of a situation and making a rational – not emotional – judgment about them.”

Financial planners run clients through risk profiler tools to check their tolerance to investment volatility, but James says good advisers also have “deeper discussions”.

“The more someone is empowered to understand the financial side, the more likely they are to take a risk,” he says.

Another risk area that is often ignored is life insurance, and that can be costly. “Quite often we see people later in life over-insured because they keep it going unnecessarily,” James says.

4. HARNESS COMPOUND INTEREST

It’s been described as the eighth wonder of the world, earning interest on your interest on your interest and so on, and it’s a key reason why people with good professional advisers often end up wealthier.

Superannuation shines with compound interest because of its long-term nature, and other investment strategies can deliver similar results.

“At the end of the day you are not working for every dollar you earn,” James says.

“It’s money working for you outside your own personal exertion, and it keeps building.”

5. SPEND LESS THAN YOU EARN

Financial planners see many high income earners who funnel every dollar of their wage – sometimes more – into their lifestyle.

“Regardless of how much you earn, the ability to manage what you earn and spend makes a big difference to the financial planning strategies you can use,” Smith says.

“If you haven’t spent some time listing out your income and expenses lately you probably should. It’s even more important in the environment we find ourselves in right now with rising costs of living.”

Advisers often come across clients whose expenses exceed their income. Picture: iStock

6. STRATEGY STACKING

Smith says target more than one financial strategy at a time. So rather than focusing solely on debt reduction, you may also examine cash flow, risk assessment, regular investing and rewarding yourself.

“There is a mistake in trying to stack every financial planning strategy you can, thinking it will do more for you,” Smith says.

“In fact, it could result in an overly complicated and unstable stack. You also need to stack your financial planning strategies in the right order.” For example, making large extra superannuation contributions may not be the best strategy if you’re still paying off high-interest debt.

FIVE MONEY TRUTHS

1 Your education doesn’t prepare you for your adult financial life.

2 Your parents probably didn’t prepare you either.

3 Most people plan for a tax deduction, not a lifestyle.

4 Nothing will change if you don’t change.

5 To change, you must equip yourself.

Source: Smart Money Strategy by Luke Smith

Originally published as Financial planning strategies and secrets: how to boost your wealth