Imagine you are taking a long-anticipated, well-deserved vacation. You researched the city and points of interest along the way that you want to visit, scoped out popular restaurants and the various activities you can’t wait to enjoy. You’ve read every guide book and Internet blog rating the best hotels or BNBs and asked travel-worn friends for first-hand tips. You even hired an experienced travel agent to ensure that your vacation has the best chance of being a successful experience. If Americans would only spend as much energy planning their financial goals as they do their vacations, their fiscal health might be more secure.
There are many reasons people don’t engage in financial planning; sometimes it is the perceived cost and time commitment, other times it is a lack of a relationship with a competent planning firm, and still other times, it is pure procrastination. Although it requires some effort on your part, the process of creating, adopting and maintaining a financial plan is pretty straight-forward and can be greatly enhanced with the oversight and assistance of a Certified Financial Planner®.
To get started you first need to define and prioritize your goals and objectives and reduce them to writing. To borrow a quote from the late Zig Ziglar, “A goal properly set is halfway reached.” People in different stages of life will have different goals. Millennials may be interested in paying off student loans, saving for a down payment on a first home, and possibly planning for a family. Generation Xers may be more concerned about education expenses, adequate and cost-effective insurance or buying a larger home for a growing family. Baby boomers will be laser-focused on retirement and possibly helping out their grandkids or aging parents. Retirees are typically interested in reducing risk and maximizing the longevity of their assets, transitioning those assets to others, and simply enjoying a dignified retirement. Regardless of your stage in life, anyone can benefit from financial planning.
After your goals are set, you need to identify all current and future resources including retirement accounts and other financial assets, real estate, sale of a business, any potential inheritance and Social Security. Additionally, your investments must be prudently managed in low-cost, risk appropriate strategies to ensure the resources needed will be there. Your plan should be designed to offer you a reasonable probability of success, at reduced cost but without unnecessary risk.
Financial planning is not a one-time event but an on-going process that requires oversight and tweaking as your life evolves to ensure that you stay within your confidence zone. If you want your life’s financial journey to be as successful as that vacation, careful planning can make a world of difference.