After years of lurching in financial disturbances caused by recession and financial crisis, the world is, once again, looking to the future. The renewed confidence has many people looking forward for their long term goals that, just a few years ago, appeared out of reach. However, as people have already learnt, simply having a long-term goal, irrespective of being an early retirement or a college education plan for your children, is never enough.
A financial objective is a life destination that requires a map and a way to get there, assuming that you have finite resources with which you can successful make the trek. In simple terms, if you have a long term goal, financial planning can help you get there.
What exactly is Financial Planning?
We all have certain things in life that we wish to accomplish, and a majority of them requires financial resources. These accomplishments are known as financial goals. Living a secure and enjoyable retirement life is a goal shared by most people. In addition to this, parents want to secure enough to buy their dream house, provide good college education for their children, or expand their business further. While they work towards these goals, they want to ensure financial security of their loved ones. These all become intricately linked pieces of the financial puzzle.
A financial plan is mainly about carefully imitating those pieces and fitting them in their suitable place so that they work meritoriously together, towards your vision. If a piece goes missing or doesn’t fit right, it can skew all of the other pieces. When you become financially successful, more and more pieces are required to complete the financial puzzle, such as tax strategies, risk management, and estate planning. Owing to their impact on the total financial puzzle, it is critical to have a well-perceived, cohesive plan.
The financial planning process enables you to focus on your specific goals clearly while addressing all your concerns, so that no obstacles long your way. And, having a comprehensive, well-perceived financial plan enables you to shutout the constant buzz of gloom and doom, because, in the long-run, your plan is all that matters.
Steps in the Financial Planning Process
The financial planning process involves four essential steps that help in achieving your long-term goals; however it does require discipline, patience and adherence to the basic financial principles.
Establish Clearly Defined Goals
Hardly does anything of financial importance happen inadvertently. In reality, in the absence of a clearly defined, quantifiable goal that is set along a realistic time horizon, there are chances that it won’t happen. Your goals need to be realistic as well as inspiring enough to motivate you to action. It is not enough to know what you want to achieve; you need to have a deep sense of why it is important, and how it would make you feel when achieved. Thus, to set a realistic goal, envision it, quantify it, and make sure that you have the resources to fund it.
Assess Your Current Financial Situation
Financial planning is an unceasing process that involves assessing yourself concerning your goals. This enables you to make the amendments in your strategies necessary to keep you on track. The financial picture of an individual or an organization comprises of a balance sheet and a cash flow statement. Your objective is to improve your financial picture constantly, which includes reducing debt, increasing cash flow/savings, growing your assets, which could enable you to achieve your goal early, or target additional goals.
Create an Actionable Plan
A financial plan typically comprises of numerous strategies, each designed to state a different piece of your financial puzzle. Developing an efficient investment and savings strategy for accruing the funds needed for your goal is apparently a key measure of your financial plan. But then, life happens, and your financial plan should also consist of strategies to deal with the contingencies of life, such as an illness or an accident, or even an untimely death in the family that could derail the whole plan.
Monitor and Measure Your Plan
The biggest blunder many people make is to create a financial plan and then make it rest on the bookshelf. A financial plan is an incarnate, working document that should reflect your current situations as well as the effect of the changing environment. It becomes a yardstick against which your progress towards your goals is measured.
As your personal circumstance change and evolve, your plan and strategies needs to be updated. The more frequently you assess your situation and measure your progress, the more minor any adjustments to your strategies will be.
Seek Professional Guidance
Though financial planning is no rocket science, yet there are a plenty of resources available to develop your own. The knowledge required to navigate through multiple disciplines is beyond the capabilities of a layman. In addition to this, most people lack the patience and discipline to adhere to a plan strictly, especially when their emotions get an edge.
A proficient financial advisor in Melbourne can guide you through the procedure of planning your future by designing your strategies and navigating through the complex universe of financial products and investments more efficiently. Likewise, he/she can also be your financial instructor, holding you accountable to your plan while training you through your sentiments and cheering you towards the finish line.