Like all good ideas for these articles, they tend to come from discussions with friends, usually over a couple of beers. I find after a couple of beers, people feel more comfortable to ask the questions they might feel they are a bit embarrassed to ask.

This friend in particular asked why he would need a financial adviser when he could just invest in an exchange traded fund (ETF). For anyone that doesn’t know, an ETF is an investment fund in which you can buy shares on the stockmarket. They are a low cost entry point to investments and can be really useful. I loved his question and responded with another question which I think caught him a bit off guard. I asked him why he had invested?

This seems like a simple question but wasn’t easily answered. After some thought, he responded that he wanted to make money. Whilst making money is always a good thing, it shouldn’t be your goal. A financial plan is far more complex than simply putting some excess money into an investment account. Every time you spend a dollar today, you are denying yourself something in the future. On the opposite side, every dollar you save for the future, you are denying yourself enjoyment of that money today. A good financial plan takes what you are trying to achieve and models a few options so you can make some decisions. You might want to take a big holiday this year, but after reviewing your financial plan, you work out that you can take it 2 years from now and also have your home deposit. You might want to model out what would happen if you went back to work 3 days a week instead of 2, and whether you could stay at 2 and pay off your homeloan a couple of years later. My point is, you need a plan.

Without a plan, you are just putting money into an investment account for a far off time. A far off time which may never come and without purpose, won’t bring you the happiness that you are meant to get from spending your hard earned money.

So before you start investing, ask yourself what you want to spend that money on. What are you investing for? Without a plan, you most likely won’t pick the right investment but more importantly, you probably won’t get the enjoyment out of that money you deserve.

As always, feel free to get in touch with any questions. To my friend, sorry I made you the subject of this post. I’ll be sure to buy you a beer next time.

About the author: Ben Brett

Ben Brett owns and operates Bounce Financial with his wife, Cara. Having started his career as a Corporate Lawyer, Ben has always had a passion for helping make the complex things simple. Follow Ben on Instagram @benbrett14 or on LinkedIn at www.linkedin.com/in/ben-brett/