FINANCIAL PLANNING
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What is Financial Planning?

The financial planning process consists of six steps that help you take a "big picture" look at where you are financially. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals.

The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans. As life and circumstance change, so your financial plan will need to be reviewed and revised on a regular basis: 

• Ensure you are on track to meet your goals
• Identify and address new goals and
• Make sure the financial tools you are employing still meet your needs.

Steps to the Financial Planning Process:

1. Identifying and setting short, intermediate and long-term goals. Ideally, each goal will have a date and dollar amount attached to it. 

2. Evaluating your current situation - cashflow analysis and calculating your net worth. You need to honestly assess your current financial status, including positives and negatives. 

3. Review your insurance coverage, including life, disability, home, auto, umbrella liability and long-term care. 

4. Review your current tax situation to identify tax-saving opportunities and potential deductions. 

5. Review your estate plan to ensure that your will, living will, healthcare power of attorney and other estate planning documents (revocable living trusts and durable power of attorney) are up-to-date and valid. 

6. Develop a retirement funding plan that covers when you plan to retire and how much you will need to support your retirement lifestyle.

7. If you have children, develop a college funding plan to help cover higher education expenses.

8. Develop an overall investment plan with proper investment portfolio that supports your goals, while staying within your investment time horizon and risk tolerance.

All of these areas will help you develop your initial financial roadmap.

Finally, review your plan and progress periodically by giving yourself an annual check up to make sure you are staying on track. Life will throw you a curveball from time to time; divorce, a serious illness and an unexpected job loss can all affect your financial plan. So be prepared and be flexible.
 

How To Make Financial Planning Work For You

You are the focus of the financial planning process. To achieve the best results from your financial planning, you will need to be prepared to avoid some of the common mistakes by considering the following advice:

1. Set measurable financial goals.
Set specific targets of what you want to achieve and when you want to achieve results. For example, instead of saying you want to be "comfortable" when you retire or that you want your children to attend "good" schools, you need to quantify what "comfortable" and "good" mean so that you'll know when you've reached your goals. 

2. Understand the effect of each financial decision.
Each financial decision you make can affect several other areas of your life. For example, an investment decision may have tax consequences that are harmful to your estate plans. Or a decision about your child's education may affect when and how you meet your retirement goals. Remember that all of your financial decisions are interrelated. 

3. Re-evaluate your financial situation periodically.
Financial planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. Revisit and revise your financial plan as time goes by to reflect these changes so that you stay on track with your long-term goals. 

4. Start planning as soon as you can.
Don't delay your financial planning. People who save or invest small amounts of money early, and often, tend to do better than those who wait until later in life. Similarly, by developing good financial planning habits such as saving, budgeting, investing and regularly reviewing your finances early in life, you will be better prepared to meet life changes and handle emergencies. 

5. Be realistic in your expectations.
Financial planning is a common sense approach to managing your finances to reach your life goals. It cannot change your situation overnight; it is a lifelong process. Remember that events beyond your control such as inflation or changes in the stock market or interest rates will affect your financial planning results. 

6. Realize that you are in charge.
If you're working with a financial planner, be sure you understand the financial planning process and what the planner should be doing. Provide the planner with all of the relevant information on your financial situation. Ask questions about the recommendations offered to you and play an active role in decision-making.