Think about the last time you took a big road trip. Rather than hop in the car and wing it from point A to point B, you probably mapped out the best route first; found hotels and scenic points along the way; and planned a backup route in case a traffic jam or stormy weather knocked you off course.
Financial planning is a bit like preparing for that trip — except point A is where you stand with your finances today, and point B is the future you who has accomplished your goals with the help of smart money decisions. You may have to make detours along the way — because of obstacles like losing a job or getting hit with a five-figure home repair — but with the proper planning, you can still make it to your destination.
WHAT CAN FINANCIAL PLANNING HELP WITH?
Financial planning can help you meet your financial goals and celebrate life’s milestones with a sense of security, like:
- Getting married
- Buying your first (or second or third) home
- Growing your family
- Paying off debt
- Sending your kids to college
- Starting a business
- Living your dream retirement
- Protecting your family should something happen to you
- Passing on your assets to your children
Once you have a sense of what your goals are and the timeline you want to reach them by — whether that’s in the short, medium or long term — financial planning helps you assess what you need to do to get there. Sometimes you may not even be clear on what your goals should be; financial planning can help with that too. Then you look at what you earn, spend and save to evaluate what decisions and changes may be necessary to help ensure you stay on track. It’s all done with the help of a financial plan.
WHAT IS A FINANCIAL PLAN?
Think of a financial plan as your roadmap. A financial plan looks at your finances in a holistic way and breaks down what you’d need to do in order to meet your goals, taking into consideration all your financial obligations. And when the unexpected throws a wrench into things, your financial plan can help you recalibrate, sort of like a GPS for your money. A financial plan can include:
- How much you should put toward your retirement nest egg
- How much to maintain in an emergency fund
- How much you should put toward big and small savings goals, whether it’s buying a new car, planning a family vacation or funding future college tuition
- Advice on which savings and investment vehicles can help you reach your goals, and how to manage your portfolio according to your needs
- The types of solutions that can help protect your family, your income and your assets, or help cover future needs like long-term care
- How to pay down debt, like your credit card balances or student loans
- A budget that shows how your income can be used to cover your expenses and goal contributions — while making sure you can still have fun
- An estate plan that will help ensure the wishes for your family and assets are carried out after your death
Financial planning can help you meet your financial goals and celebrate life’s milestones with a sense of security.
A financial plan can be put together with the help of a qualified financial planner or professional, who can help you get organized, prioritize your goals and offer advice on the decisions you should consider to best meet your needs. He or she can also connect you with other professionals, such as tax or estate planning advisers, for those areas of your finances that require very specialized knowledge.
Once your financial plan is put into place, implementing it is really where the rubber meets the road. But remember that as your life changes, so will your financial plan. A financial professional can check on your progress, keep you accountable and help you make adjustments as needed, such as when you’re expecting a new addition or find that you simultaneously have to juggle taking care of your kids and aging parents.
Life is a journey that can have many twists and turns, and financial planning can help you prepare for them — and make sure that your money helps, rather than hinders, meeting the dreams you have for you and your family.