Financial planning


Financial Planning

Why does planning work?
I think there are three reasons why planning can be so effective

  • Planning identifies what's important. Just thinking about your future is a good thing. Doing so clarifies your thinking and helps you figure out what's truly important for yourself as well as your family. Once you've decided what's important to you, you can ensure that your financial resources are directed toward those important goals. 
  • Planning resolves conflicts. If you're anything like me, when you sit down to make a list of what's important, you rapidly get a long list. A key aspect of the planning process is to set priorities. 
  • Planning prevents backsliding. To a certain extent, a plan is a set of rules you make today in order to govern future behavior. The reason this matters is that investing is an emotional activity. During the inevitable ups and downs of the market and the normal chaos of daily life, it's easy to lose sight of the long term and make decisions based on short-term, often unimportant, and even destructive considerations. A well-thought-out plan gives you that reference point, that compass to refer back to. It helps keep you focused on the right things.

Preparing a complete plan founded upon realistic assumptions about your situation is that vital first step on the road to becoming a successful investor Financial Planning Process

The Financial Planning Process consists of the following six steps:

1. Establishing and defining the client-planner relationship.

2. Gathering client data, identify goals.

3. Analyzing and evaluating your financial status.

4. Developing and presenting financial planning recommendations and/or alternatives.

5. Implementing the financial planning recommendations.

6. Monitoring the financial planning recommendations.