Financial planning is not just about sticking to a budget. It’s about understanding how and why you spend, what your needs are, and how you can make your money go further. Financial planning is more than just a system. It’s the key to living within a budget and being able to live comfortably despite the pressures of modern life. As a financial planner, I am often asked: ‘what financial planning services do you offer?’
Financial planning isn’t just about setting goals. In fact, it’s all about setting and achieving those goals. Financial planning is an ongoing process, not an item. Financial planning is your long-term strategy for wisely managing your money so that you can reach your financial objectives, both now and in the future, while still negotiating the financial stumbling blocks that inevitably arise from our lifestyle and circumstances. Financial planning helps you plan for the future so that you have financial security at retirement.
For many years, financial planners were viewed as ‘courageous’ professionals who would try to steer clients away from stocks and bonds that offered higher dividends. More, I see people today seeking out financial planners who are accredited by CFP National. Certified financial planners are viewed as being less pushy and more knowledgeable in their field. While the service of personal financial advisors is still required in some instances, today anyone with an internet connection can take advantage of financial planning services provided online.
As most experienced financial planners will tell you, setting financial goals is easy. However, achieving those goals is not as easy. While you should always want to move toward your financial goals, setting sensible and attainable goals is not an exact science. The reality is that everyone’s situation is unique. Therefore, the scope and complexity of financial planning and investment decisions vary from individual to individual.
You may know in your heart what your retirement goals are-perhaps you have a firm financial plan in place to achieve those goals. However, when it comes to actually attain those goals, it can be very difficult to determine how your individual financial situation is likely to evolve. Your goals may remain the same while your circumstances change. A good financial planning advisor is often adept at evaluating a client’s current financial situation to determine a realistic and practical retirement goal.
Once you have determined a realistic retirement target and additional retirement income goals, the next step in your financial planning recommendations is to set a solid financial plan that is realistically feasible. In order to do this, financial planners often begin with an inventory of assets and liabilities. They then begin to develop a balanced portfolio that includes equities (which include stocks, mutual funds, bonds, property, cash deposits, and other financial assets), equities within fixed-return investment products (FRIPs [orfinance products including treasury bills, commercial paper, municipal bonds, mortgage notes, and commercial mortgage notes]), commodities, and short-term financial instruments. The goal is to build a portfolio that has both a significant concentration of fixed return assets and adequate exposure to equities while protecting against financial risks.
While balanced and realistic financial planning should always take into account any current changes to your financial situation, it is especially important to evaluate your lifestyle and your long-range financial goals in your retirement. As your life goals progress through time, you will probably change your financial objectives and your financial planning process as well. It would be unwise to withdraw your savings or invest the money in risky bonds while you are still young and healthy because these investments will not generate the income or returns that you need in order to reach your financial goals. Likewise, it would be foolish to invest in risky stocks or other financial products when you are older because these investments will not help you meet your life goals. Only when you are in your golden years can you truly benefit from your investments and make the most of your financial planning.
For many people, financial planning and investment are the single most important aspect of their financial lives. The American Financial Planning Association says that financial planning helps “to attain and preserve optimal health through planning for future living and welfare.” Therefore, financial planners play a vital role in providing healthcare and insurance to their clients in the form of retirement and investment solutions.