In Ireland the Celtic Tiger brought with it unprecedented access to credit facilities, which were gladly lapped up by the Irish public. However, the legacy of poor financial planning from this era is now plain to see.

During this boom, many people found themselves owning multiple rental properties without ever examining how these portfolios should be structured to maximise efficiencies in all areas including cash-flow, tax planning, wealth creation and wealth protection. Now that the economic conditions have changed so dramatically in tandem with a tightening of cash-flow, the lack of planning is having a direct impact on how people are managing their own personal economy and possibly limiting chances to generate future wealth.

Take the example of an individual who has found themselves owning multiple rental properties, but who has never taken the time to put appropriate financial planning controls in place. Poor planning may have resulted in a situation where the individual has to use some of their own money to help cover the cost of owning these properties.

Where an individual owns investment properties, these properties should be self financing assets. This means that the money receivable (rent) should be greater than the costs associated with owning the property. If the property is not self financing and you have to contribute some of your own money to cover the costs, it becomes highly inefficient as the money that you will be using will most likely be coming from your salary on which tax has already been deducted. In such a situation you have not only tied up your wealth in an illiquid asset, but have also created a drain on your cash-flow. In most cases, it is possible to create a situation whereby you can improve your cash-flow position through restructuring the finance arrangements and also ensuring that you minimise any tax liability.

If, through appropriate tax and financial planning, the individual in question can create a situation where the rental properties are now self-financing and possibly providing a surplus income, the whole picture changes. In this situation, you have now freed up your cash-flow, which allows you to use this money to fund other areas of your personal economy and implement plans to generate future wealth.

So what should you do to help develop your personal economy now that you have freed up some of your cash-flow? The answer to this will be different for each individual. However, there are a few fundamentals that all people should look at.

Credit card debt and other short-term debt is a burden that most of us are faced with. This debt is very expensive due to the high rates of interest payable and therefore, clearing this debt should be high on your priority list.

Using the money that you have been able to free up, you can now focus your attention on paying off any short-term debt. By clearing this debt as soon as possible, you can help to free up even more cash-flow, which can in turn be used in other areas of your personal economy.

Once you have managed to clear the short-term debt and have been able to free even more cash-flow, you can now look at clearing longer term debt such as the mortgage on your home. Your home is the most important asset that you own, as it provides shelter for you and your family. Therefore, you should look to remove any threat to this security and as such, clearing the mortgage on your family home should also be high on the priority list. By using the improvement in cash-flow to pay off your mortgage early, you will not only increase your security but could also save thousands in interest repayments.

There is also an element of long-term planning that needs to be implemented as part of any balanced financial plan, and the area of retirement planning should also be addressed.

Many people are currently underfunded in their pension arrangements and while this is not a short-term problem, it is important that you look to the future so that you can enjoy retirement. Freeing up your cash-flow in one area may enable you to increase pension contributions and help to ensure a secure retirement. By contributing to the pension, you can also take advantage of the generous tax reliefs available and therefore increase your efficiency in the area of tax planning. As mentioned, each individual will require a different plan to suit their needs.

However, you will now see the knock-on effects that improving the efficiency in one area of your finances can have on all other areas of your personal economy. You will also see how the improved efficiency can snowball through your personal economy to save money, improve cash-flow and develop your wealth. This is just an example of how you can develop and grow areas of your personal economy by maximising efficiency in just one area of your finances.

There are many other areas where efficiency can be improved through sound tax and financial planning, resulting in the same opportunities for growth and wealth creation. You can therefore see how vital it is to take a holistic approach to your financial planning in order to maximise efficiencies in all areas of your finances