Alexandra Armstrong: Financial planning is not a product, it is a process. Think of it as a roadmap, a way to get from here to there in a designated time, with the fewest detours and potholes along the way.
There are 6 important Steps to the Financial Planning Process. The first step is to Establish Your Goals. You probably have set some specific life goals of your own already; a comfortable retirement, a college education for your children, your own business, or a dream home. Goals differ for every person, but whatever your goals may be, you need a plan to reach them. Think of your goals as your financial targets. After you Establish Your Goals, the next step is to Gather the Essential Documents, such as pay stubs, tax returns, bank statements, and credit card statements. The third step is to Analyze and Evaluate Your Financial Status. Once you have answered the question what do I want, you will need to answer questions, what do I have and what do I owe? Answering these question means assessing your resources to see financially where you are at right now and where you are headed in the future.
Next, you will need to Develop a Financial Plan. This is the step that puts the plan in financial planning. This is where you and your planner devise the specific tactics that you will use to pursue your goals. Depending on exactly what those goals are, your strategies may include things like building an emergency fund, establishing a savings and investment plan, or readjusting your current investments.
The fifth step is to Implement the Plan by listing each step with the deadline for accomplishing them. This is done to make you and your planner accountable for the strategies that have been adopted.
The last step is to Monitor the Plan and make necessary adjustments. This step is absolutely one of the most important steps of the Financial Planning Process. Once the plan is implemented the results will need to be monitored on an ongoing basis, to make sure it is achieving the objectives you have established. This should be done at least once a year, perhaps in January or February, after you have received all your year-end statements.
By following these steps, you will be able to create a financial plan and hopefully achieve your goals.