Guide to Financial Planning

So you are at a point in your life where you want to plan for your financial future. And, you don’t understand about financial planning. Where do you start? This article’s purpose is to provide a guide for you in the area of financial planning.

The financial planning process is an ongoing process involving various steps. The end result is a financial plan which can, and will, change throughout time due to varying circumstances such as medical emergencies, unemployment, goal changes, and other life events. A good sound financial plan can be modified to suit changing needs.

First, financial planners will work with you to determine where you currently are. Areas included in determining your current situation include: 

1) Net worth (what’s left after your liabilities/debt are subtracted from your assets)
2) Current income
3) Lifestyle (retired, middle class, travel a lot, etc.)
4) Risk tolerance
5) Financial responsibilities (current and long term)
6) Other living responsibilities
7) Financial resources (savings, investments, etc.)
8) From this information a financial profile will be developed.

As part of this profile, it would be determined what resources you need for maintaining your current lifestyle, a “needs assessment” if you will. A guide to what a “needs assessment” consists of is your: 

1) Debt obligations
2) Housing costs
3) Food costs
4) Medical expenses
5) Any other recurring expenses (expenses happening on a regular basis)

The combination of these two areas results in a cash flow analysis — inflows (income) and outflows (expenses) in very simplified terms. A net worth analysis is another useful tool your financial planner would use as a guide during this assessment phase.

After assessing where you currently are and what you need, financial planners will work with you in determining your financial goals and objectives. It could be: 

1) Financial security
2) Travel
3) A vacation home
4) Estate planning
5) Retirement planning
6) College funding
7) Entertainment