Do You Really Have a Financial Plan?
IT’S ALL ABOUT THE BIG PICTURE
Financial planning is about much more than investment planning. The financial planning process encompases a greater scope.
WHAT EXACTLY IS “FINANCIAL PLANNING”?
Financial planning takes a holistic, big picture view of you, your lifestyle, and your financial needs and priorities. Without this broad approach, it’s like trying to see out a window with the curtains half-closed. You need the full view to understand and make the right decisions about every aspect of your finances.
WHAT DOES A FINANCIAL PLAN INCLUDE?
A comprehensive financial plan covers every area of your financial life, from investments and real estate to insurance and retirement planning. There are a number of financial planning areas that a comprehensive financial plan may take into account:
HOW CAN A FINANCIAL PLANNER HELP BRING IT ALL TOGETHER?
- Financial Management: Your current and projected future financial position, including cash flow (the balance of what you’re earning, spending and saving), budget and net worth.
- Insurance and Risk Management: Strategies to minimize your exposure to unexpected financial loss due to death, health issues, property damage, business and other risks.
- Investment Planning: Managing your investments based on past experience, attitudes, objectives, times horizon, risk tolerance and need for income.
- Retirement Planning: A plan for your post-employment financial well-being, comparing your desired retirement lifestyle with retirement assets, planned savings, expected sources of income and return on investment.
- Tax Planning: Your current and future tax obligations and strategies to minimize or defer taxation on personal and/or business income.
- Estate Planning: Arranging for payment of expenses and obligations after your death, as well as transfer of your wealth and other assets to successors as specified in your will and outside your will.
- Legal Aspects: Your legal rights and obligations, including spousal and child support obligations or entitlements, third party obligations, shareholder, partner or trust agreements, and powers of attorney or mandates.
An appropriately qualified financial planner like a CERTIFIED FINANCIAL PLANNER®
will take your full financial picture into account, guiding you on how a decision about one aspect of your finances may affect other key areas. For instance, an investment decision could have tax consequences that are harmful to your estate plan, or a choice about saving for a child's education may affect when and how you meet your retirement goals.
Your financial planner can take many seemingly conflicting priorities into account and help guide you toward the right decisions—the choices that will help you reach your financial and life goals, both today and in the future.