What are the four steps of Financial Planning?
Financial Planning can generally be broken down into four steps: Gathering, Planning, Doing and Reviewing. All four phases are important to the success of your financial plan because they each provide an opportunity for you to evaluate how well your plan is working. This evaluation helps you identify problems before they become serious and consider possible solutions. It also tells you if it’s time to take corrective action or revise your plan altogether.
Step 1: Gather
First, you need to gather all relevant information about your financial affairs. This refers to the income statements, balance sheets and cash flow statements that form your financial records. Typically, this information is gathered from many different sources over a period of time in order for your advisor to get an overall picture of where you are today.
Step 2: Plan
Using this information, a professional financial planner will develop a plan that incorporates your financial goals and objectives as well as your personal information. This plan is then presented to you, and it’s up to you to decide whether it meets your wealth management needs and lifestyle goals for sustainable financial wellbeing.
Step 3: Do
Once an action plan is determined, the next step involves actually performing tasks. These actions are usually detailed in terms of a schedule you must follow. This process involves buying and selling; adding and subtracting to different accounts; making deposits, payments and withdrawals.
Step 4: Review
This is the phase where your advisor and other professionals meet with you to review how well the plan has worked out for you. The focus at this point turns to any mistakes that may have been made, and steps are taken to correct them. This phase also encourages you to look ahead and plan for the future.
A good financial planner will assist his or her clients through all four of these phases: Gathering, Planning, Doing and Reviewing. In fact, gathering information is only one step in this process. Evaluation takes place throughout the entire process, as does action.
What goals should I be able to achieve with the financial advice I receive?
In order to have a successful financial plan, it is important to have the right goals. There are many ways to achieve them, and a good advisor can help you figure out what is best for you. For example, if your goal is saving up money for a child’s education then the right plan could be paying off your mortgage as soon as possible so that when the time comes, there won’t be any debt to worry about. The first step in all of this though is knowing how much money you need! Financial planning can help you achieve your goals such as:
- Having enough money in savings for emergencies and unexpected events
- Achieving an improved credit score and lower interest rates on loans or mortgages
- Building up a retirement fund if you’re not already retired
- Paying off mortgage
- Saving for a child’s education
- Buying property
To find out how much money you’ll need for financial planning purposes, ask yourself these questions: What do I want? How long will it take me to get there? What resources do I have available (e.g., cash on hand or liquid assets, savings, investments)? How much will it cost me to get there? Do I have financial resources that are not readily available—for example, retirement pension funds or other long-term assets?
Once you’ve answered these questions and established your wealth management goals, you’re ready to move forward and seek out a professional financial advisor.
How do I choose the right financial advisor for my needs?
When looking for a financial planner, it is important to find someone who shares your values and concerns. Every situation is different, so it’s important that each client feels comfortable talking with his or her advisor. Our Penrith team has been helping locals with their financial strategies and wealth management needs for over 30 years and we would welcome the opportunity for a ‘getting to know you and your needs’ phone call to see if we will be the right fit for you.