Financial planning

18 September 2019

When you plan, you identify your goals and develop strategies to meet them.

When you do financial planning, you’re looking toward the future, specifically at building the kind of security you’d like to have and being able to afford the lifestyle you want. But to plan successfully, you also have to evaluate the present, including the financial choices you’re making now. Otherwise it’s too easy to find yourself making random decisions that won’t move you toward your goals effectively, or that may even interfere with achieving them.

It’s never too soon, or too late, to begin financial planning. Financial planning is important whether you’ve just started working or are thinking seriously about retirement. And it should be a continuing process so that you can evaluate your progress, revise your goals, and update your strategies on a regular schedule.

A financial plan is a game plan that evaluates your current assets and debts, identifies the things you want (or need) to provide for, and lays out a strategy to pay for them. Developing the plan is one thing. Sticking to it is another.

Without planning, you run certain financial risks. You may not have enough in reserve to meet expenses you’re expecting, like the down payment on a home or the price of a college education. You may have to revise your retirement plans. Or you might leave your family without enough to live comfortably if something happens to you.

Defining your goals

Planning is important because it helps you identify a range of goals that you’re working to achieve.

Short-term goals

You can save for things you hope to have in a couple of years, like a new car or a new home.

Mid-term goals

There may be expenses that will occur several years ahead, like tuition payments or a vacation home.

Long-term goals

You probably have hopes for a comfortable retirement, the opportunity to go places and do things you’ve always wanted, or a chance to provide security for your heirs.

Planning strategies

In financial planning terms, creating a strategy means defining the steps you’ll take to accumulate the money you need to pay for the things you want.

To begin, you need a clear sense of what your goals are, what they will cost, and how much progress you’ve already made toward achieving them. For example, you will have to evaluate the performance of the assets you already have. And you probably will have to find ways to increase the amount you’re investing and select how you will invest it.

Seeking advice

Many people take advantage of professional advice in drawing up a financial plan and putting it into action. You can work with an adviser from the beginning, consult a number of different professional experts, or choose someone to execute the decisions you make on your own. Be sure to check the credentials of anyone you pay for providing advice or acting on your instructions through your state regulatory body, the Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC), or professional associations.

A major advantage of working regularly with an experienced investment adviser is the added incentive it can provide to get started and stay focused.

Among the places you can turn to for help with your financial planning are:

  • Registered investment advisers
  • Financial planners
  • Certified Public Accountants with planning credentials
  • Attorneys specializing in estate planning

This information is provided with the understanding that the authors and publishers are not engaged in rendering financial, accounting or legal advice, and they assume no legal responsibility for the completeness or accuracy of the contents. Some charts and graphs have been edited for illustrative purposes. The text is based on information available at time of publication. Readers should consult a financial professional about their own situation before acting on any information.

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