What is Financial Planning?
Financial Planning
The growth of financial planning as a field and profession has been hindered by a lack of consensus among advisors about the exact definition of financial planning. In fact, the number of definitions of financial planning is as diverse as the number of individuals who believe they are practicing it. This ongoing debate among financial advisors isn’t just a matter of semantics. It becomes highly practical when issues such as regulation of financial planning advisors, setting standards for the profession, and methods of regulation and compensation are brought up.
The SEC characterizes financial planning by its outcome: “Financial planning can assist in evaluating every facet of your financial life—including savings, investments, insurance, taxes, retirement, and estate planning.” The Financial Planning Association (FPA), a major member and advocate group for financial planning, describes financial planning as “the long-term procedure of intelligently managing your finances to achieve your aspirations and dreams.” While definitions of financial planning vary across the industry, common themes are evident. Financial planning is a process carried out by trained and skilled professionals. Financial planners come from various backgrounds (traditional college track or career-changing professionals) and compensation models (some are fee-based, others are paid on product sales), and they may specialize in different areas.
The Goal of the Process
Regardless of their compensation structure or fiduciary model, all financial planners share a common goal: to help clients achieve their financial objectives. This is universally recognized as the process of identifying financial goals and formulating recommendations to meet those goals. So, when you ask “what is a financial planner”, it’s someone who helps you chart a course to your financial dreams. And when you’re considering financial planning, remember it’s a process that involves professional guidance to help you make the most of your finances.
The financial planning process is an essential, yet often neglected, part of our lives. It involves setting, strategizing, realizing, and reassessing your life objectives through the appropriate handling of your finances. This powerful process can mitigate uncertainties about what’s to come, equipping you for any unexpected financial events.
Steps in the Process
The first step in this process is to comprehend your present financial status. This includes determining your income, expenses, and identifying if there’s a surplus or deficit. Once you have a transparent understanding of your current financial state, you can begin to establish immediate and long-term financial objectives. These objectives could vary from purchasing a new vehicle or home in the immediate term, to preparing for retirement or funding your child’s education in the long term.
The subsequent step in financial planning and analysis is to formulate a strategy to accomplish these objectives. This could involve saving a specific amount of money each month, investing in the stock market, or cutting down on unnecessary expenditures. The crucial aspect is to ensure that your strategy is practical, achievable, and aligns with your financial objectives.
After your plan is established, it’s vital to review and modify it regularly. Life is full of surprises, and your financial strategy should be adaptable enough to accommodate any life changes, such as a change in income, marital status, or unforeseen expenses.
Financial Planning Progress
In summary, financial planning services is more than just about money, it’s about turning your dreams and goals into reality. It’s about achieving financial independence and peace of mind knowing that you’re ready for whatever the future may bring. So, embark on your financial journey today, and seize control of your financial destiny. Remember, the ideal time to start was yesterday, the next best time is now.
Understanding your current financial situation is the first step in this journey. This involves calculating your income, expenses, and any surplus or deficit that exists. Once you have a clear picture of your current financial situation, you can start setting short-term and long-term financial goals. These goals could range from buying a new car or house in the short term, to planning for retirement or your child’s education in the long term.
The next step is to devise a plan to achieve these goals. This could involve saving a certain amount of money each month, investing in the stock market, or reducing unnecessary expenses. The key is to make sure that your plan is realistic and achievable, and aligns with your financial goals.
Once you have a plan in place, it’s important to review and adjust it regularly. Life is unpredictable, and your plan should be flexible enough to accommodate any changes that may occur in your life, such as a change in income, marital status, or unexpected expenses. In addition, one wants to ensure that they have a sound retirement planning financial plan in place.
Conclusion: Financial Planning and You
In conclusion, this process is not just about money, it’s about making your dreams and aspirations a reality. It’s about gaining financial freedom and peace of mind knowing that you’re prepared for whatever the future holds. So, start your journey today, and take control of your financial future. Remember, the best time to start was yesterday, the next best time is now.
By taking these steps, you can ensure that you are well-prepared for the future, no matter what it may bring. This process is not just about managing your money, but about using what you have to make your life better. Don’t wait for tomorrow, start today. Your future self will thank you.
1. “Shelley A. Lee, “What Is Financial Planning, Anyway?” Journal of Financial Planning, December 2001, pp. 36–46.”
2. Financial Planning Association—What is Financial Planning? taken from www.fpanet.org/Whatisfinancialplanning
3. www.sec.gov/answers/finplan.htm.
