Financial Planning Process

The Personal Financial Planning Process

The Personal Financial Planning Process Identifies Financial Goals and Objectives And Creates A Plan For Achieving Them

The financial planning process is very individual and personal. Financial planning should focus on all the psychological and financial factors that may have an impact on your financial goals and objectives. In short, personal financial planning provides you with a long-term strategy for your financial future, taking into consideration every aspect of your financial situation and how each affects your ability to achieve your goals and objectives.

Personal financial planning can help you construct the foundation on which to build a secure financial future. Through six distinct steps in the financial planning process, financial planners help you:


1.   Clarify your present situation by collecting the facts.
You will want to assess all relevant personal and financial data such as lists of assets and liabilities, tax returns, record of securities transactions, insurance policies, wills, trusts, pension plans, etc.

2.   Decide where you want to be, financially.
This will require you to identify both personal and financial goals and objectives for you and your family. Financial planners help you clarify personal and financial values and attitudes. These may include family financial planning issues like providing for your children’s college educations, supporting aging parents, or relieving immediate financial pressures that would help maintain your current lifestyle and provide for retirement. These considerations are as important as what is in your bank account in determining your best strategy.

3.   Identify financial problems that create barriers to you.
Problem areas can include too little or too much insurance, a big tax burden, inadequate cash flow, or current investments that are losing the battle with inflation. These possible problem areas must be identified before solutions can be found.


4.   Provide a written financial plan.

The length of the financial plan document will vary with the complexity of your individual situation. It should always be structured to meet your needs and objectives.

5.   Implement agreed-upon recommendations from your plan.
A financial plan is only helpful if the recommendations are put into action. However, the decision to implement, modify, or reject the recommendations presented in your plan remains your sole responsibility. You may request that the planner assist in the implementation of the agreed upon recommendations, including coordination with other knowledgeable professionals as required. Or, you may implement the plan yourself.

6.   Periodically review and revise your plan.
A financial plan can be no better than the data upon which it is based. Periodic reviews and revisions of the plan are essential to account for changes in personal and economic conditions. While this task may be accomplished without assistance, it is usually advantageous to have financial planners provide these services for you.


What is a Financial Plan?

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