Financial
Planning--Helping You See the Big Picture
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.
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 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.
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