PERSONAL FINANCIAL PLANNING
You certainly can add the term "financial planning" to the
growing list of buzzwords for the '90's. We are bombarded
from all sides by experts telling us how we should plan to
meet our financial goals. To help eliminate some of
the confusion, let's break down financial planning into five
components: gathering information, setting goals, creating
a program, implementing the program, and monitoring the results.
Gathering information gives you a "snapshot" of your current
financial situation and what you have to work with. Among the
information you need to amass would be sources of income and
expense, values of personal savings and retirement accounts,
audits of life and disability insurance policies, and examinations
of will and/or trust documents.
Setting financial goals is by far the most critical part
of the planning process! You must establish clearly
defined, attainable goals that you can feel comfortable with
and endorse in a heartfelt way. Vague, overly aggressive estimates
of what you'd like to achieve, as well as lack of motivation
will only lead to procrastination, inactivity, and, ultimately,
failure to attain your true goals.
Some examples of common financial goals that many people
wish to achieve include funding a college education, estate
planning, and financial security/retirement planning.
Finally, in addition to developing clear objectives, it
is equally important to prioritize your financial goals by
relative importance and timeline to achieve them.
With the help of your team of professional advisors, your financial
objectives can be analyzed in terms of where you currently stand
so that a program can be developed to enable you to achieve
them.
In developing this program, your financial planning team
should present a number of alternatives designed to allow
you to realize those objectives. Some of these alternatives
might include more sophisticated will and trust documents
designed to eliminate or reduce your estate taxes, maximum
participation in tax favored plans (e.g., 401k, 403b, IRA,
etc.), or perhaps an analysis of available retirement options.
Remember that the final program selection is ultimately
your decision, but you should choose the program that will
be most effective in helping your realize your future financial
goals, based on your current personal financial situation!
Once you have reviewed all of the alternative methods of accomplishing
your financial goals presented by your financial planning team,
it will be time to implement the program you have selected.
Often many people begin to feel uncomfortable at this time,
because this is the time that changes are about to be made.
However, if your objectives are truly heartfelt, you will
feel able to make the necessary changes that will allow you
to accomplish your goals.
Your financial plan needs to be monitored at regular intervals
to make sure it is accomplishing the results you desire. Because
your financial strategy was developed based on a "snapshot"
of your financial situation at the inception of the plan, you
should be sure to report any changes in your personal financial
profile (e.g., the birth of a child, an inheritance, etc.) to
your financial planning team to determine the impact such changes
may have on your overall plan. That will enable you to make
the appropriate adjustments to keep you on target to achieving
your financial goals, or to change those goals based on your
current financial situation.
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