What is Financial Planning?



Whether you're starting a family, building a business, or looking to make the most out of your financial resources, a financial planner can help you. However, when meeting with individuals for the first time, some are confused as to what financial planning even is. And part of the confusion lies in how broad planning can be. In this post, we’ll breakdown what financial planning means and how powerful it can be.



Financial Planning 101

Financial planning is the process of maximizing your financial resources to accomplish your life goals. Your financial resources include your income, property, investments, liabilities, taxes, insurance, and employee benefits. Because goals are unique to each person, financial planning is a highly customized process. For example, one individual may have the goal to start a restaurant at age 40 while another individual may want to retire at age 60 and travel the world. Based on the personalization of these goals, these two people may have completely different financial strategies such as, tax strategies, investment allocation, and insurance and estate planning needs.



Your 401(k) Is Not A Financial Plan

“I have a 401(k) with a 6% match, I should be okay.” While a 401(k) and employer match is a great benefit, it is not a financial plan. It is one small yet important element out of many moving pieces. And more likely than not, once someone begins reflecting on all the elements in their financial life, they quickly start to realize that a 401(k) alone is not sufficient to achieve their goals.


A well-constructed plan creates not only a roadmap to achieve your life goals, but prepares you for the uncertainties that come with life. These may include the scenarios of developing a disease, losing a job, a weak economy, or an untimely death. And while these are scenarios that no one wants to think about, we must acknowledge their possibility.



Why Hire A Financial Planner

Bringing all of the elements of your financial life together is a challenging task. While you may be competent in one area like investment management, odds are, you probably need assistance in other areas like cash flow management, employee benefits, insurance selection, estate planning, or tax planning. A competent financial planner, such as CFP® Professional, will have the expertise to assist you.


With that said, the greatest benefit of working with a planner is the intangible value. Setting realistic and measurable financial goals, implementing action items, and preparing you for the financial impact of life transitions. These are the items that are not so easily quantified.



Key Takeaway

Financial planning is a dynamic process. Your financial goals may evolve over the years due to shifts in your lifestyle or circumstances, such as an inheritance, career change, marriage, home purchase or a growing family. As you begin thinking on how best to manage your financial future, consider reaching out to schedule a free consultation.


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