Come one come all! Gather up and listen, now is the time. Doesn’t matter where you are at in your life. Whether you are a recent grad or on the doorstep of retirement, you need to start financial planning. Since October is National Financial Planning Month, there is no better time to get started. We plan everything; we plan birthdays, we plan vacations, we plan weddings, we plan our day, we make plans to plan! Unfortunately, most people don’t plan with their money? That is surprising considering there an entire month devoted to this type of planning!
What is financial planning?
Financial planning is more than saving, more than investing, It is even more than a well put together an investment portfolio. Financial planning at its most basic form is the process of laying out a road map of financial goals including short-term, intermediate, and long-term goals. But most importantly, it is the process of how to achieve those goals. You see, savings without investing won’t get you there. What’s more, investing without planning won’t get you there either.
Why have a plan?
Most people struggle in their financial lives, not because of something they did but instead, it’s something they didn’t do. Growing wealth involves more than investing. It involves looking all aspects of your financial picture and more importantly how they all interact with each other. Small issues, if not corrected, always become big problems. I think the reason why most people do not have a plan (2015 Gallup poll indicated only 38% of investors had a written financial plan) is that it can seem overwhelming. A good advisor can help break all that down into small manageable pieces. Remember that elephant, one bite at a time!
What goes into a financial plan?
To start, you need to get an accurate picture of your current financial situation. This involves looking at what assets you have, what liabilities, and types of insurance. It’s important to gather up as much information that you can on each item. For example, if you have a debt, what is the interest rate, term, current payment. Next, you will want to begin to put together a budget. Begin by estimating your monthly expenses and break them down by discretionary expenses and non-discretionary. But making a budget isn’t’ enough, it has to be monitored and tracked – each month looks a little different than the others. Budgeting is a proactive activity, you must look ahead at each month and identify what is coming up and how to adjust the budget for that month. Most people tend to be reactionary with their budget, in other words, looking back at the prior month (“oh shoot, I spent too much at Starbucks…I’ll get ’em next time”). Next, think about goals. These should be broken down into 3 categories: short-term goals, intermediate goals, and long-term goals. Working with an advisor who focuses heavily on the planning side of things can help you draw your road map from your current financial situation to your financial goals.
Financial Planning doesn’t have to overwhelming, as a matter of fact, The Retirement Planning Group has been helping folks from all walks of life eat their elephant for more than 13 years. So, don’t let this October slip away without taking the initiative of starting your financial plan. For what it’s worth, October is also National Dessert Month!