Do you pic­ture your­self own­ing a new home, 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. Finan­cial plan­ning is a process that can help you reach your goals by eval­u­at­ing your whole finan­cial pic­ture, then out­lin­ing strate­gies that are tai­lored to your indi­vid­ual needs and avail­able resources.

Financial Planning, the big picture

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 have the peace of mind that comes from know­ing that your finan­cial life is on track.

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, and eval­u­at­ing 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 meet your finan­cial objec­tives
  • Mon­i­tor your plan, mak­ing adjust­ments as your goals, time frames, or cir­cum­stances change

Some of 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.

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.

Invest­ment advi­sors pro­vide advice about invest­ment options and asset allo­ca­tion, and can help you plan a strat­e­gy to man­age your invest­ment port­fo­lio.

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 plan­ning 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.

Relat­ed Arti­cles: 

 If Life is a Jour­ney, Should­n’t Finan­cial Plan­ning be a Process?

How Much Annu­al Income can your Retire­ment Port­fo­lio Pro­vide?

Tak­ing on 5 Big Retire­ment Myths

Pre­pared by Broad­ridge Investor Com­mu­ni­ca­tions Solu­tions, Inc.