Financial Planning-Basics Steps To Getting Started

Financial planning comprises of two main elements -The financial strategy (or plan), and the investment strategy. The financial strategy looks at wealth creation, debt management and retirement planning, while the investment strategy examines asset allocation and investment selection.Regardless of the scope of the Financial Plan the process includes six basic steps. These are illustrated below.1. Gather all the factsYou need to put together an accurate picture of your financial situation including the assessment of your investment and risk profile, which can range from conservative to aggressive. Work out your monthly cash flow.2. Set financial goalsWrite down your short, medium and long term income requirements, expenditure estimates, as well as identify any other personal and business needs.In the grand scheme of things money is not that important. What is important about money is that it enables you to enjoy the things which are important to you.3. Identify optionsBy taking advice from a fee based independent financial planner, they should be able to identify a variety of financial strategies and investment vehicles that fit your investment and risk profile. After analysing information on all the available options, they will then develop the most appropriate financial strategy for your objectives.All necessary documentation, product application forms, etc, are completed. All the elements that form the recommended plan are actioned.4. Portfolio and Plan reviewYour portfolio and plan should be reviewed on a regular basis. This can be discussed with the independent financial planner. As your needs and circumstances change, a review of your plan can identify whether changes are required to your portfolio.5. Implementation of final planA draft plan is then prepared incorporating the advice, recommendations and reasoning for proposed actions, including a full disclosure of costs, to meet your specific financial goals and objectives. This plan is then reviewed by you and modified where necessary. A final plan should then be agreed.6. Ongoing Review and ManagementFinancial planning is an ongoing process. The preparation and implementation of the recommendations arising from the plan is only the start of the financial planning relationship.On an ongoing basis, your investments and investment structures must be regularly reviewed with regard to your situation, goals and objectives to ensure that they remain appropriate.Often strategies must be adjusted to make allowance for changes in your circumstances and goals. Essentially a plan will grow with you and your goals for the future.Our economic environment, government rules and regulations and your personal situation will continually change over time.The ongoing review and management of your finances will enable adjustments to be made to your strategy where necessary to keep your portfolio on track to meet your goals and objectives.

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Benefits to Financial Planning

It was John Lennon who wrote “Life is what happens to you while you’re busy making other plans”. Many people are so busy planning their holidays, their next outing or just getting by in life that they forget about planning for their future. And they do not understand the benefits to financial planning.Sound financial planning brings about financial security. Without a plan the tendency is to drift through life, perhaps even lurching from crisis to crisis. It may be that you live life in a constant state of worry about the future and have no idea that life can be better.Every aspect of our life is affected by finance in some way. Planning means that if the unexpected happens there is some preparedness to help avoid long-term financial stress. Emergencies can cause financial hardship when you are not prepared and a sound financial plan will include strategies to cope.Having a plan in place helps you to save through budgeting. A big part financial planning is having a budget. A budget will help you to keep track of your expenses and show where to make adjustments to cut down on unnecessary spending. It will help you to distinguish between needs and wants, and show what you can afford and what you must save for.Budgeting will help you to exercise more efficient control of your money.Not only does a budget help control spending habits it can help you to eliminate your debts. By understanding what you need to do and where your income comes from you can chip away at your debt.Financial planning gives you the benefit of achieving your goals. Whether you want to save for a new home, a comfortable retirement, or education for you and your family these will be included in your plan. Strategies are devised to help you achieve the goals you set. Saving is made bearing in mind your goals, risk profile and time frame.Many planners include insurance strategies in their plans. To my mind this should be part of everyone’s plan as if the unexpected happens and you become ill or disabled your whole plan could be in jeopardy.Estate planning will ensure that your assets are distributed the way that you intend. Financial planners will always recommend you have a will and that your estate is in order.Planning allows you to control your finances and your life. It gives you peace of mind and financial freedom. Sound planning strategies help you to cope even in the toughest of financial situations. These are only some of the benefits to financial planning.

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