How To Do A Proper Financial Planning?
If you thought financial planning was only for the uber wealthy, it’s time to think again. Financial plans matter even more if you aren’t rich – they help you to stay on track.
Financial planning is for everyone who wants to protect their money, remain financially independent, save for the future, accumulate funds for doing, and have the things they want while keeping sight of long-term goals for themselves and their loved ones.
It’s essentially the process of evaluating how much money you would need to maintain a particular lifestyle in the future when you may not have a fixed or regular income. It’s a way of keeping the future in mind while achieving your immediate and short term requirements.
Do You Need A financial Plan?
Let’s take a look at some facts:
· 78% of Americans who have a financial plan are able to pay their bills on time
· 68% of Americans with a financial plan in place are able to put aside an emergency fund
· People who plan have more financial discipline and make better investments
· 60% of people who have a written-down financial plan say they feel more confident and financially stable
· People who plan are able to take ownership of their financial goals, and they keep updated with the latest amendments and regulations
· Financial planning helps you save money, legally, that you might have had to pay out in taxes
Do You Need Help From A Professional Financial Planner?
While most people are able to keep an account of where their money comes from and where it goes, compute their own taxes and evaluate their liabilities, it does take a great deal of time and effort. Unless you are educated in the financial field, making sense of the numbers can be a challenge for the DIY financial planner enthusiast.
Government regulations are constantly changing, with new updates and regulations being released from time to time. It’s nearly impossible to keep abreast of these unless you are a professional in the field of financial planning. Every individual’s financial plan is unique, depending on their age, occupation, income, expenditure profile, goals, etc. so it’s not easy to get a one-size-fits-all, cookie-cutter solution. A professionally trained financial planner helps to customize your financial plan to meet your individual needs, preferences, and budget.
The Ideal Financial Plan
Professionals like Pittsburgh Wealth Planning recommend that you incorporate certain elements into your ideal financial plan for the best results.
Keep it measurable, attainable, and specific. Otherwise, you would find that your plan cannot be evaluated for efficiency or relevance. It’s important to put down every time, specifically; otherwise, your plan would be missing certain elements that could take you by surprise later. If your plan is over-ambitious and something beyond your capacity to achieve, it’s not going to work. Another element is to create a plan that takes predictive elements into account. This helps you to have a preview of market trends, expenses, etc., and work them in combination with your present circumstances.
It’s also crucial to ensure that your plan is time-bound. This is a key element in any planning, financial, or not. Unless you place your financial goals within a time-frame, you do not provide the right momentum and velocity.
Make sure your plan stays flexible and not too rigid to take changes in your circumstances and lifestyle. Your social status, income, and expenses may also change over the years, and you may have to ramp up or reduce your lifestyle.
A professional financial planner can help you to create a simple, well-designed, and easily managed plan to monitor investments regularly. For example, if you monitored the social media company Snap late in 2020, it was a good time to buy snapchat shares, which rose by more than 6% in one day because the news broke that the company was launching a new video feature called Spotlight to compete with TikTok.
How To Plan Properly
1. Get going immediately: No matter how old/young you are, every year matters when you create a plan for the future.
2. Document everything: Write down every detail of your present income, expenses, liabilities, and investments. Once you have these particulars on record, it’s easier to create a viable plan. Otherwise, you’d be working in the dark, without enough information. This would also include a net worth statement that specifically documents your investments, bank accounts, real estate, and other valuable personal items. Another statement can describe in detail your liabilities, such as mortgages, card payment dues, loans, etc. This serves as a starting point for your financial plan, and the goal would be to eliminate/reduce your liabilities and increase your assets. Plan to pay off high-interest debts as soon as possible.
3. Budgeting: This is an important aspect of your financial plan and is really the working aspect of it. Here you need to take thorough and complete stock of your expenditure – regular payments such as rental/mortgage, household expenses, groceries/food, entertainment, insurance, children’s fees/expenses, and if you have regular medical expenses. It’s also important to factor in occasional expenses such as holidays, shopping, gifting, etc. based on your experience of them.
4. Plan for Future Events: If you’re unmarried, you can start planning for it because this may require a certain amount of shared planning. You can involve your partner as early as possible and decide how much of your planning would be shared and how much would be individually managed. It’s also important to ensure that your financial planning doesn’t drive a wedge between you and your partner – maintaining secret accounts, spending on big ticket items from joint accounts, etc. could be potentially disastrous. If you plan to have children, remember that there could be a slew of expenses, right from birth on, so these aspects have to be discussed with your financial planner for a more inclusive plan.
5. Insurance: Life-events that could dry up your source of income are things that can happen to anyone, and appropriate insurance can protect you from the shock. Purchase the right kind of auto, home/rental, disability, business, and life insurance so that the premiums can be met regularly. If you find a financial advisor in San Jose , your experienced and reputable professional financial planner can give you the right inputs, guidance, and focus as you move towards achieving your financial goals.