Financial Planning - Helping You See the Big PictureSubmitted by Desmond Wealth Management, Inc. on October 3rd, 2016
Do you picture yourself owning a new home, starting a business, or retiring comfortably in the near future? These are a few of the financial goals that may be important to you; however, each comes with a price tag attached. That's where financial planning comes in as the process to help you reach these goals by evaluating your whole financial picture, then outlining strategies tailored specifically to your individual needs and available resources.
Why is financial planning important?
A comprehensive financial plan serves as a framework for organizing all the pieces of your financial picture. With a financial plan in place, you will be better able to identify and 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 comprehensive financial plan will also demonstrate how your financial goals are related -- for example, saving for your children's college education might impact your ability to save for retirement. Then you can use the information you have gleaned to decide how to prioritize your goals, implement specific strategies, and choose suitable products or services. Best of all, you will 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, investment portfolio, tax exposure, and 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 have carefully considered any recommendations, decisions are 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 does not end once your initial plan has been created. Your plan should generally be reviewed at least once a year to ensure that it is up-to-date. It is also possible that over time you will 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
- A life-changing event such as marriage, the birth of a child, health problems, or a job loss
- 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 has not performed as expected
- You are affected by changes to the economy or tax laws
Common questions about financial planning
What if I'm too busy?
Do not wait until you are in the midst of a financial crisis to begin 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. 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.