Financial Planning - The Big Picture
Do you picture yourself owning a new home, sending your kids to college, starting a business, or retiring comfortably? These are a few of the financial goals that may be important to you, and each comes with a price tag attached. That's where financial planning comes in.
Some people think of financial planning solely in context of retirement planning; in reality, financial planning is a process that can help you target your goals by evaluating your whole financial picture, then outlining strategies that are tailored to your individual needs and available resources. Retirement planning is often a focus because it may be the largest financial goal that an individual or couple have, requiring a lifetime of savings and careful consideration; however, comprehensive financial planning also incorporates other goals and attempts to balance current goals (this year's vacation or new home purchase) with long-term goals (like education or inheritance for children). Financial plans also look at risk factors to the plan and how to minimize them, through the use of insurance or other means.
Why is financial planning important?
A comprehensive financial plan serves as a framework for organizing the pieces of your financial picture. With a financial plan in place, you'll be better able to focus on your goals and understand what it will take to reach them.
One of the main benefits of having a financial plan is that it can help you balance competing financial priorities. A financial plan will clearly show you how your financial goals are related--for example, how saving for your children's college education might impact your ability to save for retirement. Then you can use the information you've gleaned to decide how to prioritize your goals, implement specific strategies, and choose suitable products or services. Best of all, you'll know that your financial life is headed in the right direction.
The financial planning process
Creating and implementing a comprehensive financial plan generally involves working with financial professionals to:
- Develop a clear picture of your current financial situation by reviewing your income, assets, and liabilities
- Evaluate your insurance coverage, your investment portfolio, your tax exposure, and your estate plan
- Establish and prioritize financial goals and time frames for achieving these goals
- Implement strategies that address your current financial weaknesses and build on your financial strengths
- Choose specific products and services that are tailored to help meet your financial objectives*
- Monitor your plan, making adjustments as your goals, time frames, or circumstances change
Some members of the team
The financial planning process can involve a number of professionals.
- Financial planners typically play a central role in the process, focusing on your overall financial plan, and often coordinating the activities of other professionals who have expertise in specific areas. They can also provide advice about investment options and asset allocation, and can help you plan a strategy to manage your investment portfolio.
- Accountants or tax attorneys provide advice on federal and state tax issues.
- Estate planning attorneys help you plan your estate and give advice on transferring and managing your assets before and after your death.
- Insurance professionals evaluate insurance needs and recommend appropriate products and strategies.
The most important member of the team, however, is you. Your needs and objectives drive the team, and once you've carefully considered any recommendations, all decisions lie in your hands.
Why can't I do it myself?
You can, if you have enough time and knowledge, but developing a comprehensive financial plan may require expertise in several areas. A financial professional can give you objective information and help you weigh your alternatives, saving you time and ensuring that all angles of your financial picture are covered.
Staying on track
The financial planning process doesn't end once your initial plan has been created. Your plan should generally be reviewed at least once a year to make sure that it's up-to-date. It's also possible that you'll need to modify your plan due to changes in your personal circumstances or the economy. Here are some of the events that might trigger a review of your financial plan:
- Your goals or time horizons change
- You experience a life-changing event such as marriage, the birth of a child, health problems, or a job loss
- You have a specific or immediate financial planning need (e.g., drafting a will, managing a distribution from a retirement account, paying long-term care expenses)
- Your income or expenses substantially increase or decrease
- Your portfolio hasn't performed as expected
- You're affected by changes to the economy or tax laws
Common questions about financial planning
What if I'm too busy?
Don't wait until you're in the midst of a financial crisis before beginning the planning process. The sooner you start, the more options you may have.
Is the financial planning process complicated?
Each financial plan is tailored to the needs of the individual, so how complicated the process will be depends on your individual circumstances. But no matter what type of help you need, a financial professional will work hard to make the process as easy as possible, and will gladly answer all of your questions.
What if my spouse and I disagree?
A financial professional is trained to listen to your concerns, identify any underlying issues, and help you find common ground.
Can I still control my own finances?
Financial professionals make recommendations, not decisions. You retain control over your finances. Recommendations will be based on your needs, values, goals, and time frames. You decide which recommendations to follow, then work with a financial professional to implement them.
Think financial planning might be helpful to you?
Contact us below to set up a free, no-obligation consultation to see how financial planning might help you.
*There is no assurance that working with a financial professional will improve investment results.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020.
