Take Control: Financial Planning 101
Written by Emily Butcher
As the economic “recovery” slowly limps along, many young professionals too often find themselves managing their finances haphazardly – if at all. A deliberate, clearly-outlined financial plan lays the foundation for taking control of your spending and ultimately, your future security.
“Creating a financial plan will give you meaning and direction in your financial choices, which will give you insight and visibility into the impact your current choices have on your future,” says Brittany Benassi, Trust Administrator with AAFMAA Wealth Management & Trust.
Seek the Help of a Professional
Don’t know where to begin? Enlisting the help of an expert can make the endeavor as painless as possible.
A Certified Financial Planner is recommended to best offer knowledgeable direction and Benassi says, “A comprehensive financial plan should include a long and short-term plan that includes estate planning, insurance analysis, education funding, retirement planning, and cash/flow debt management.”
The clincher, she says, is that “the real value in a financial plan lies in the implementation and monitoring of the decisions you make – otherwise, the plan will be nothing more than a large file gathering dust.”
Taking Charge of Investments
“Anyone can manage their investment portfolio if they have the time, knowledge and discipline to do so,” says President of AAFMAA, Rick Convy. “The hardest investment skill to develop and maintain is discipline. Humans are hard wired to make decisions that are exactly opposite of correct investment choices. They follow the herd, have hindsight bias, and have a myopic aversion to loss. They focus on the short-term, overreact to market movements, invest in what is familiar, buy when the market is high and sell when the market is low.”
When it comes to determining how to allocate your portfolio, consider time horizon, liquidity needs and risk tolerance. Convy adds, “Be honest with yourself; many investors will say they have a high tolerance for risk when the market is high and things are going well. Their risk tolerance vanishes when the inevitable down market cycle comes along. If you can’t take the heat, don’t go in the kitchen. The lower your risk tolerance, the lower your allocation to volatile asset classes should be.”
To ensure long-term investment success, rebalancing is a critical component, Convy says, and “that is where discipline comes in to play.” Lacking in adequate time, knowledge and the all-important trait of discipline? He concludes, “It is well worth the cost to have a professional handle it.”
Security For Your Future
“For many, retirement planning is a peripheral concern. It should be just the opposite,” says Benassi. “Life expectancies are increasing along with medical and living expenses. These factors increase the risk that many will outlive their assets. It is never too early to start saving for retirement and creating a plan for your future.”
Additionally, consider a trust, even if you wouldn’t have previously considered one. “Trusts are not just for the wealthy – they are a tool that can be used by many regardless of total assets,” says Benassi.“There are several other benefits to using a trust, including helping to clearly distinguish lines of inheritance, provide for children with special needs, help family members with spending concerns, protect assets from creditors, and donating to charity.”
The first step towards taking control of your finances is giving it the time and attention it deserves, rather than remaining on the back burner as long as your bank account isn’t in the red. Even if you’ve evolved past the living-paycheck-to-paycheck stage, now is the time to make managing your money a priority.
On a parting note, Benassi says, “A financial plan provides a foundation for your future financial well-being and the sooner you define where you want to be, the sooner you can plan on how to get there.”
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.