What is Financial Planning

What is Financial Planning?

According to Financial Planning Association, “Financial planning is a process, not a product. It is the long-term method of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life. In order to create a sound financial plan, goals must first be established. Data is then gathered to analyze and evaluate your financial status. Once complete, your plan can be developed and implemented. Monitoring the plan on an ongoing basis is essential in order to make necessary adjustments to reach your goals.”

Benefits of Using a Financial Planner

How do you know if you could benefit from the services of a financial planner? You may not have the expertise, the time or the desire to actively plan and manage certain financial aspects of your life. You may want help getting started. Some reasons for seeking professional financial planning guidance might include:

Making sure your money will last during retirement or rolling over a retirement plan
Handling the inheritance of a large sum of money or another unexpected financial windfall
Preparing for a marriage or divorce
Planning for the birth or adoption of a child
Facing a financial crisis such as a serious illness, layoff or natural disaster
Caring for aging parents or a disabled child
Coping financially with the death of a spouse or close family member
Funding education
Buying, selling or passing on a family business Procrastination is the greatest enemy of financial independence and using a financial planner will keep you on track.

What Is Financial Planning?

Financial planning is about three key things: finding out where you stand financially, naming your personal financial goals, and creating a plan to reach those goals. It’s that easy!

Financial Planning identifies, organizes and prioritizes your financial goals, then outlines the steps you need to take to achieve them. They can also lend some insight as to if you’re on track to meet your financial goals or if you need to make adjustments to your spending. These plans may revolve around consolidating debt, opening bank or brokerage accounts, establishing a savings regime or building an investment plan.

Steps to Create a Financial Plan

Most people have a wide range of short- and long-term financial goals, from paying down debt to planning for retirement, to building a college fund, or whatever the goal is. But since everyone’s personal situation is unique, each financial plan will look a bit different. In general, though, there are five main steps to the creation of any in-depth financial plan:

Determine your financial goals.
Pull together any relevant documents and account statements that paint a picture of your current financial situation.
Create a short- and long-term plan to reach your financial goals.
Begin putting your financial plan into practice.
Adjust your financial plan as your life and goals change.