A Walk Through of Financial Planning Process
As an adult, almost every decision you make, mostly has to do with money: your diet plan, your education & career goals, a family vacation & etc, all involve financial planning component to it. Hence financial planning is important to your life; success or fail to plan your financial will impact your life related to money, whether you chase after money (if you are in debt) or you make the money work for you (if you invest your money to increase your net worth).
Many people don’t plan to fail but they fail to plan; either they don’t know the correct financial planning process or they are chartered procrastinators who have thousands of excuses not to get started their financial planning process. Don’t let the procrastination to be your obstacle to get started your financial planning to secure for tomorrow. The bottom line for everyone to plan their financial successfully is to know the process of financial planning and know how to get started; here are six areas of financial planning that we will review together. Please note that these areas are all interrelated. What affects one area impacts the others as well.
1. Goal Settings
In your financial planning process, you can always get started with your financial goals setting. You should make your goals realistic so that they will be achievable. In order to set a realistic goal, you need to know your financial situation and the project future financial ability. Takes out all the important documents such as mortgage agreement, bank account fixed deposit, car loan contract & etc; based on all these information, compile a list of your current debts and assets. And from there, estimate the timeline when you will paid off these debts and make a projection of your future incomes. You set your goals based on these results at a realistic and achievable level.
2. Risk Management
Common method of risk management is using insurance to protect your assets from a loss that you couldn’t afford on your own. Insurance is a financial product that will give you a piece of mind. The insurance company will try to make you whole if you suffer a loss. Insurance coverage for assets, disabilities, sickness and even life is an important element that you should include in your financial planning process to minimize the potential risk of loss.
3. Tax Planning
Are you taking advantage of all tax benefits Uncle Sam has to offer? Although Uncle Sam has always has his hand in your wallet because he wants his fair share, but he also offer tax benefits for you, so you need to know how to take advantage of these benefits. The goal of tax planning is to help you minimize your federal income tax liability as much as you are allowed by tax law while saving for retirement.
4. Retirement Planning
When you are at age 25, retirement will seem so far away. At 25, you will think 60 are old, but when reach 60, you think 85 are old. Retirement planning should begin with your first job. So you need to figure out how much to save from now so that you will reach you goals of retirement later. There is never too early to start planning for your retirement.
5. Investment Planning
In your financial planning process, you should think of how to increase your asset net worth and achieve your financial goals with what you have right now. Investing is a tool you can use to achieve your financial goals that you set for yourself. All investments come with certain risks; you need to understand how much risk you should be taking with your investment to achieve your goals.
6. Estate Planning
Life journey will end one day, but many people try to avoid thinking about. The fact is no one will get out of this world alive, so you might as well plan for it. There is a need to protect your assets from Uncle Sam and to have things get in order for your loving family that you will left behind later.
In Summary
Financial planning is important to your life; success or fail to plan your financial will impact your life related to money. The six areas of financial planning that we just reviewed are all interrelated. Hat affects one area impacts the other areas as well, you should be aware of these areas and ho they impact your financial strategies.
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Financial Planning
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What strategys should I use to develop a sound personal financial plan?
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August 28th, 2009 at 3:29 pm
I set up his budget form (modified to our specific bills) on Excel. Now that was about 4 years ago.
Now he has software (about $25) available on his website or subscribe to My Total MOney Makeover section of his website and you can do the budget there (link below). Or Crown Financial (originally started by the late Larry Burkett who Dave gives a lot of credit to) has budgeting forms and online software. (Link below) Crown also has software (last link)
Both would be the best way to stay completely in line with Dave's principles. Both of the on-line subscriptions have free trial periods.
August 28th, 2009 at 3:50 pm
So many things to do, hard to boil it down without more info but…
1. Determine your goal. Can't plan to get there if you don't know where you are going.
2. See where you are so you know what you are dealing with. Look at your bills, spending patterns, debts, assets, etc.
3. Work on your high interest debt. Get rid of credit card bills or any other debt with high interest. If it is going to take some time, try to negotiate lower rates or consolidate into a lower rate.
4. Set up a regular savings plan so you have some emergency funds.
5. Once your credit card / high interest debt is out of the way work on 'bigger debt' like student loans, car loans, etc. If renting do the math and see if an affordable house can save you some money. Make sure to keep up your regular savings plan until you have a few months backup
6. Work on getting house, car, big loans paid off and keep that savings plan going
Also want to make sure to: Check out life insurance for dependents, check out / make a retirement plan, make sure I'm making good daily decisions on my spending.
Just my 2 cents worth.
August 28th, 2009 at 9:41 pm
Your personal financial plan must be based on your personal financial goals. First, determine what goals you want, then write a plan. You could visit your local bank and ask the financial planner at your branch to help you set a financial plan.
August 30th, 2009 at 1:13 am
BusinessPlans.org contains a large library of business plans
http://www.businessplans.org/index.asp
August 30th, 2009 at 6:48 am
Hamilton's idea was for rich people to loan the government money through bonds. In order for those bonds to retain any value (and the people holding them to be able to cash them in later), the government would have to survive. Therefore, those rich people would use their influence to make sure the government succeeded. Common people living hand-to-mouth didn't have extra money to loan out, or influence that would affect the fate of the new government, so they were pretty much left out of this process.
August 30th, 2009 at 10:26 am
On Medicare you can expect to pay $95 a month for part B, and if you want an insurance supplement expect between $100 and $150 a month with no deductibles or co pays. If HMO around $78 a month with co-pays and deductibles. If you are not 65 plan on about $500 a month for private coverage until you are 65.
August 30th, 2009 at 10:22 pm
There are 2 ways that CFPs might be compensated. On a fee basis, or on a commission basis. If the CFP is not trying to sell you specific investments, $3,500 to $4,500 is probably very reasonable for a fee-only comprehensive plan (Goals, investments, insurance, retirement, and estate planning).
If however you are going to be encouraged to buy particular mutual funds or insurance products, then the planner is probably being compensated by commission. In that case, charging $3,500+ is probably double dipping. The complexity of your financial situation factors into whether the fee on the whole is reasonable. Think in terms of the CFP having professional fees equivalent to those of a CPA or attorney. If professional fees in your part of the country average $200 hourly and the bill ultimately is $4,000, then that translates to about 20 hours of professional services work on the part of the planner.
August 30th, 2009 at 11:58 pm
Most people need a goal to work toward in order to succeed. Even though it may vary significantly, it gives you a figure to strive for, and hopefully exceed. Then when you do exceed it, it's a great feeling that you wouldn't have if you hadn't set the original goal.
August 31st, 2009 at 7:06 am
Blue chip stocks