Sky Unlimited || Financial plan

Financial planning

Once Sky Unlimited has analysed the information form, carried out the initial consultation, and once you have taken the decision to work with us, we are ready to start constructing a financial plan which will be unique to your personal situation. In our view, a financial plan is based on the following 3 cornerstones:

Cash Flow

Equity

Risk Management

Sky Unlimited will dedicate as much time as required to take you through these 3 major elements one by one, as they will, in a balanced way, form the financial foundation on which your personal financial plan will be built. On this foundation lie the 7 building blocks of your financial plan, these are:

During the Personal Assessment phase you and Sky Unlimited will determine which of these building blocks require more attention than others, bearing in mind that a financial plan is typically an integration of the majority of these components.

Success factors

Sky Unlimited strongly believes a financial plan can not be called successful unless it embodies the following attributes:

Flexibility: Financial needs and goals are subject to change throughout the life cycle – kids grow up, careers advance, risk profiles change, etc. As such, a financial plan needs to be flexible enough to evolve with you.
Clarity: A financial plan can only be managed correctly when it is fully understood by all parties. Sky Unlimited will therefore share the ins and outs of the financial plan with you in full detail, explaining in clear language what the plan means in terms of your personal situation.
Cost consciousness:Constructing a financial plan, hiring a money manager, tax expert or buying any financial product all cost money. Sky Unlimited realizes this better than anyone and wants to ensure that you know where your money is going at all times. Therefore, Sky Unlimited will, together with you, regularly assess the costs associated with the financial plan and evaluate if these are justified. Remember, you are the CEO!
Honesty: Most financial products and standard mortgage instruments carry terms and conditions – often in “fine print”, and hardly explained in detail. If not well understood, these terms could negatively affect the outcome of a financial plan or present unwelcome surprises at a later stage. Sky Unlimited values the slogan: “what you see is what you get”, so you may be assured that what is in the financial plan is exactly what you and Sky Unlimited have agreed upon.

Cash Flow Management

As mentioned earlier, we view your financial household as a small (or large, as the case may be) company. This means that the financial tools put to work in any professionally-run company also apply to your “Me, Inc.” Examples of these tools are:

Depreciation: the inherent decrease in the value of your assets over time. To calculate depreciation, the cost of a valuable asset is divided by the number of years the asset is expected to last.
Leverage, current ratio: this is the sum of current assets (what you own) divided by current liabilities (what you owe). This ratio determines the solvency of your company, i.e. the ability to pay your bills on time.
Balance sheet: summarizes the assets owned by your business on one side, and the sources of your assets on the other side. These sources have 2 basic categories:
- Liabilities: borrowed money and outstanding payments, reserves for estimated expenses in the future, deferred income tax, etc.
- Owner’s equity: money invested by you and profits your “business” has earned and retained.
Cash flow statement: summarizes sources and uses of cash over a period. These sources have 3 basic categories:
- cash flow from profit making or operating activities
- cash flow from investing activities
- cash flow from financing activities

We understand the above accounting jargon may come across as intimidating for those with limited financial vocabulary, however, Sky Unlimited will work with you to develop a comprehensive plan, explained in clear and understandable language, which meets your objectives.

Equity / Capital Management

Sky Unlimited is not a licensed broker or private equity manager, however instead, we track and evaluate the performance and service of several small and large firms which meet our standards in fulfilling our Client’s needs.
We work closely together with established names in the field, and work only with those companies that have a track record of proven results, customer satisfaction and cost consciousness.

Similar to the way in which we view your household finances, we consider your investments as one of your separate companies: ‘Growth Inc’ in this case.

Furthermore, Sky Unlimited has carried out extensive research on historical parameters regarding interest rates, asset allocation, stock market performance and investment strategies.

In general, Sky Unlimited aims to plan your investments in such a way that they will generate “absolute returns”, combined with low volatility.

We view your “investment company” as a business for the long run. First we determine your goals and objectives (short, medium and long term) for capital growth and risk.
Then we can calculate your required Return on Investment (“ROI”) which will to a large extent dictate your portfolio’s asset allocation profile. The actual execution of the growth plan will be delegated to one of your (our?) asset managers.

Risk Management

Life is full of risks. No one can see into the future. The level of risk someone is willing to accept is very personal. In general, people are inclined to avoid risk, often at any cost. But in order to benefit from investing, one must take on a certain level of risk. One of the most difficult aspects of risk management is going through the process of determining the level of risk that the Customer is willing to accept. Sky Unlimited believes in covering risks where necessary or possible, but accepting a measured amount of risk can create opportunities!

A good example is the topic of interest rate with regard to mortgage instruments. Many people feel it is desirable to have their mortgage interest rate fixed over a long period of time. Sky Unlimited accepts that this can sometimes be a good and prudent strategy, but there are situations in which it might not be!

On one hand, having fixed mortgage payments provides peace of mind and insurance against rising short term interest rates. The question is however, what does the other side of the coin look like? And what are the opportunity costs of such peace of mind?

You won’t be able to take advantage of falling interest rates
Even if interest rates do not change for a period of time, you’re still locked into paying a high premium
Long term mortgage deals are difficult and or expensive to renegotiate should you come across a better deal with another provider

You could be achieving significant savings on your monthly mortgage payment!

The question regarding the level at which the risk of rising interest rates should be covered is very much dependent on the ratio between mortgage payments and disposable income, so the right answer depends on your personal financial situation. Financial planning can be seen as a playing field between risk and reward. Sky Unlimited can help you determine which position on this playing field is most appropriate for your situation.

We will, together with you, establish your PRP or Personal Risk Profile, which is unique to you. Furthermore we will conduct a full assessment of all your financial risks. We will then look at your current risk coverage, check for overlaps, look at potential opportunities and evaluate with you whether the level of risk coverage is adequate and in line with your PRP and future plans.

The following areas have an impact on risk assessment:

Life
Health
Unemployment
Asset volatility profile
Liabilities versus disposable income
Divorce
Leverage / solvency
Durable / high value goods