Financial Planning

What is Financial Planning?

Financial Planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a house, saving for your childs higher education or planning for retirement. The Financial Planning Process consists of six steps that help you take a “big picture” look at where you are currently. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals. The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans.

The Benefits of Financial Planning

Financial Planning provides direction and meaning to your financial decisions. It allows you to understand how each financial decision you make affects other areas of your finances. For example, buying a particular investment product might help you pay off your mortgage faster or it might delay your retirement significantly. By viewing each financial decision as part of the whole, you can consider its short and long-term effects on your life goals. You can also adapt more easily to life changes and feel more secure that your goals are on track.

The Financial Planning process consists of the following basic six steps :

1. Establishing and defining the client-Planner relationship

The Financial Planner should clearly explain or document the services to be provided to you and define both his and your responsibilities. The Planner should explain fully how he will be paid and by whom. The Planner should also disclose any restrictions on his ability to give unbiased advice and disclose any conflicts of interests. You and the Planner should agree on how long the professional relationship should last and how decisions will be made.

2. Gathering client data, including goals.

The Financial Planner should ask for information about your financial situation. You and the Planner should mutually define your personal and financial goals, understand your time frame for results and discuss, if relevant, how you feel about risk. The Financial Planner should gather all the necessary documents before giving you the advice you need.

3. Analyzing and evaluating your financial status.

The Financial Planner should analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you may have asked for, this could include analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.

4. Developing and presenting Financial Planning recommendations and/or alternatives.

The Financial Planner should offer Financial Planning recommendations that address your goals, based on the information provided by you. The Planner should go over the recommendations with you to help you understand them so that you make informed decisions. The Planner should also listen to your concerns and revise the recommendations as appropriate.

5. Implementing the Financial Planning recommendations.

You and the Planner should agree on how the recommendations will be carried out. The Planner may carry out the recommendations or serve as your "coach", coordinating the whole process with you and other professionals such as solicitors or stockbrokers.

6. Monitoring the Financial Planning recommendations.

You and the Planner should agree on who will monitor your progress towards your goals. If the Planner is in charge of the process, she should report to you personally to review your situation and adjust the recommendations, if needed, as your life changes.

Common Mistakes in Financial Planning Approach

The following are some of the common mistakes made by consumers in their approach towards Financial Planning

• Do not set measurable goals.
• Make a financial decision without understanding its affect on other financial issues.
• Confuse Financial Planning with investing.
• Neglect to re-evaluate their Financial Plan periodically.
• Think that Financial Planning is only for the wealthy.
• Think that Financial Planning is for when they get older.
• Think that Financial Planning is the same as retirement planning.
• Wait until a money crisis to begin Financial Planning.
• Expect unrealistic returns on investments.
• Think that using a Financial Planner means losing control.
• Believe that Financial Planning is primarily tax planning.

For more detail, Please contact your Financial Planer