To kick-off this blog post, I have a special announcement to make: Financial Planning is a Process, Not a Product. Are you shocked? Horrified? Surprised? Perhaps this is the reason so many people tend to shy away from it? They’re looking for that tangible, one-size fits all solution to their financial problems that will fix things in a jiffy. Hate to be the buzz kill, but unfortunately, that’s not how it works. (And you shouldn’t go chasing things that claim to do this.) The good news is that Financial Planning doesn’t have to be scary. It doesn’t need to cause anxiety, stress or be shied away from. Why is that? Well, to be honest – you’ve probably already been through the steps of the Financial Planning process before. In fact – you’re probably already familiar with them and the work that has to go in behind them.
Financial planning is a six-step process.
- Establish Goals: Before you can actually begin to create a financial plan, you have to first determine what your goals and vision are. Having a clear, documented list of the goals you’re working towards is a great way to kick-off the financial planning process.
- Gather Data: This is what I like to refer to as the “homework step.” It’s definitely not fun (who really likes homework anyways?), but it’s the most important step in the planning process. If you don’t have the right documents and information on hand, it doesn’t matter how great of a plan that is created. Chances are, it won’t be as useful as it could be and could cause more hiccups along the way.
- Analyze and Evaluate Your Financial Status: This is where you analyze your net worth, your spending, your investments, assets and liabilities and more. (Check out these posts for pointers on calculating your net worth, setting up your budget and considering your life insurance needs).
- Develop a Plan: This is where you’ll ask yourself what you can do to get on the right track. Perhaps it’s reducing your spending, increasing debt payoff or starting retirement savings.
- Implement the Plan: Time to get moving. Break big steps into little ones and start chipping away at that action list.
- Monitor the Plan & Make Necessary Adjustments Along the Way: If there’s a roadblock that pops up, make the necessary route corrections to go around it and get back on course.
Still not convinced you’ve been through this process before?
Let’s talk about your most recent vacation. (Side note: People tend to spend more time planning their vacations than they do their retirement.) When thinking about how you plan your vacations, you’ve very likely already implemented the financial planning process on your own.
- You Established Your Goal of when and where you’re going. I prefer a little place called Italy.
- You Gathered Data on hotel, airfare, car rental, restaurant and excursion options. The husband and I used Kayak, VRBO, and Yelp when planning our big trip.
- You Analyzed the Information in order to make the best choices for the money you’re spending. I’m a financial planner – you can bet I made a spreadsheet, or five.
- You Developed a Plan of attack for booking travel arrangements, paying for items, requesting vacation time at work, and so on. An action list in a Word doc did the trick on this one for us.
- You Implemented your Plan and went on vacation! (Hopefully it was well worth the time spent planning). Europe circa 2012 was amazing. I’m hoping for another trip this year.
- You Monitored Your Plan for Success and kept an eye on spending, adjusted for bad weather and substituted restaurants or events as needed. Flights were delayed, museums closed, an iPhone was stolen (on my birthday of all days), but the plan was still a HUGE success.
The same process that’s used for financial planning is one that you’ve used time and time again throughout your life for travel, car purchases, starting a business, planning a wedding or party, making a move and more. The financial planning process isn’t cutting edge, or mind blowing, or state of the art. What it is, is tried and true. It’s personalized. It’s based on your life and your situation. It’s meant to help you accomplish your goals, whether career, family or financially oriented. So don’t look at it as something unknown and daunting. Look at it as something you’ve done time and time again that can this time be used to help you conquer something new. Are you looking to get Financially Organized in 2014? Contact me to set-up your complimentary 30-minute focus session. Like what you read? Sign up for the Workable Wealth community for more tips and resources and receive 9 Steps to Workable Wealth, a free guide to help you kick start your financial journey.