Holistic Financial Planning

Someone once said, “If you don’t have a plan for your life, someone else does.”  What that person didn’t say is that luckily, most of us married that person!  Like it or loathe it money is important.  Money can’t buy you love but it is pretty darn good at satisfying most of our human needs, wants and desires.

Holistic financial planning looks at the income and capital you have now, and how best to use this to ensure that your lifetime financial objectives become a reality.

Goal-setting and objectives

Let’s be honest, no-one likes setting themselves goals, mainly because the prospect of failure is always present and it involves coming out of one’s comfort zone.  When it comes to money though, most of us want something to show for all our hard graft so setting goals or targets is a means to be able to recognize when our cash is working efficiently.

Before doing something positive with your money it is vital to first establish what lifetime objectives you have.  These need to be realistic and achievable.  These could include private education for children, retiring abroad, starting a business or fulfilling a lifelong ambition.  Not all of our objectives involve money but many will.

Once you have understood your objectives you then need to know at what points you will require money, for example: selecting a retirement age, an age when children might start private school or the target date for a deposit on a second property.  This will allow you to put a timeframe on your goals and give you a target lump sum or income to plan for.

Income and Expenditure

All successful businesses will know how much money they can expect as turnover and the overheads and expenses that are required to maintain and grow that turnover.  Such an approach is no different for holistic financial planning.  Boring as it may be, it is vital to understand your own profit and loss position, the companies you work for or run yourself will be doing this and you should too.  This exercise will tell you whether, you have any disposable income to plan with and also what percentage of your current disposable income is being attributed to what.  For example, spending 50% of your net disposable income on retirement planning may see you enjoy a varied and exciting retirement but would do little to help you fund private education for your children.  Your ability to generate income and lump sums through gainful employment is one of the two cornerstones that any financial plan is built on.

Assets and Liabilities

Now you know what is coming in and what is going out you are in a better position to reassess your goals and the likelihood of their success.  Before doing this you need to write your own balance sheet; this has nothing to do with Pilates but simply sets your assets against your liabilities.  Once you have done this you can assess whether the money you have amassed will meet, help with or have no impact on your goals.  Are you asset rich and cash poor?  Does this even matter?

The Financial Life cycle

How do you know what you could or should be planning for?  As we travel through life we face different financial challenges and our income and capital are put under more or less pressure.  As a basic guide the lifecycle could look something like this:

1) Employed – pre-marriage – this is typically a time when disposable income is in short supply and any spare cash is spent on having a good time.  This is a great time to start planning because premiums will be cheap for young people and starting the term of any investment contract early will always give the best chance of meaningful long term returns.

2) Employed – married – no children – this is the optimum time to start planning and putting money aside.  By now career paths should be clearer and therefore potential future earnings.  This is also the time when there is most disposable income but typically no assets in the early years.

3) Employed – married – with dependent children – starting a family undoubtedly puts strain on your finances.  One worker bee might remain in the hive and disposable income will drop.  It is likely that by now secured debt will be in place and coupled with children means that insurance needs to be high on the agenda.

4) Employed – married – with children in full-time education – it is at this point that any financial plan is feeling the most pressure.  When the family is complete the cost of living is high with larger accommodation needed, cars, holidays, schooling and university.

5) Employed – married – empty nest – now is the time to rebuild the damage created by the beloved offspring and start to repay debts and start to grow the retirement plan.

6) Retirement early years – many find adjusting to retirement quite daunting and worry about running out of money.  It is very difficult to judge how long a meaningful retirement could last before ill health sets in, this can make planning difficult.  A general de-risking of assets is now on the agenda, cash is relied upon and the impact of inflation now starts to bite.

7) Retirement later years – the latter years of retirement can be spent juggling the real or potential cost of some form of care, against trying to decumulate the asset base in favour of family and not HMRC.  As with the early part of retirement you are trying to plan for a timeframe that is not set in stone; this makes planning very difficult.

Changing with the seasons

It is vital that the interconnection between the different financial decisions you make are continually reviewed and adjusted as your situation changes.

What’s the alternative?

Of course you don’t need to follow the holistic financial planning route.  Many people fall in to the trap of doing nothing or what could be described as “scratch card financial planning”.  This is simply where someone collects a series of products and contracts from newspapers, supermarkets, banks and chance meetings with financial advisers; when something unforeseen happens or an unplanned for event materialises – one of these products or contracts is found at the bottom of the filing cabinet and whatever was done years ago, and has never been reviewed since, is relied upon as the solution!  This haphazard style of planning is costly and ineffective.  Don’t leave the success of your objectives to chance; don’t wait until you are 65 to find the scratch card that says ‘retirement’ only to find that you didn’t hit the jackpot!


In summary, take time to establish and clearly define your lifetime objectives and then fit your finances around those objectives, not the other way around.  Making a holistic financial plan should be fun and should be treated like a bonsai tree as opposed to an allotment: small amounts of very frequent but precise pruning!