What Are the First Steps for Personal Financial Planning?

A lot of people would love to have control of their hard-earned money in order to get the maximum benefits. However, many fail to comprehend the process that goes into achieving this goal. There is careful financial planning involved which would allow you to have better control over your financial situation.

Personal financial planning is never too early or too late. Sound financial guidance and an effective investment strategy will decide how well you are living today — and in the future. Using a 5-step personal financial planning phase, the potential for creating a successful financial plan should be significantly increased.

5-Step Personal Financial Planning Strategy

Personal financial planning is the long-term method of organizing your finances strategically to help achieve your goals and aspirations while overcoming the financial barriers that inevitably arise at every point in life. Always remember that personal financial planning is not a product, rather, it is a process that needs focus, a comprehensive approach determining the prudent steps that will be most advantageous for you.

Here are the five personal financial planning steps to help you achieve just that.

STEP #1. Select a professional financial consultant. A trusted financial advisor will help you create a customized financial plan and give you expert advice. However, before you embark on this new partnership, you need to be clear about the level of planning financial services that will be available to your disposal. Some of the points that you need to discuss and agree with your financial advisor:

• What are the fees for the financial advisor’s services?

• What are the responsibilities for fees by other professionals involved?

• What are the expected timeframes for the completion of the various services?

STEP #2. Gather relevant information. This step also includes identifying your goals and objectives. This phase is necessary so that recommendations for appropriate strategies and financial products to reach your goals will be more structured. You should review your current financial situation before deciding which goals and objectives are achievable. Examples of personal financial goals would include:

• Buying a second home

• Paying a child’s educational costs

• Gaining financial freedom

• Providing for retirement

STEP #3. Examining your financial position. After your financial goals have been identified, the next step is to determine how to achieve them. A financial advisor can help you analyze your finances, make tailored recommendations and formulate strategies to achieve your financial targets in the short and long term. Your advisor's recommendations will factor in your timeframe, risk tolerance, and investment goals. A financial consultant will also review the following with you:

• Debt Service Ratio

• Liquidity Ratio

• Solvency Ratio

• Savings Rate Ratio

STEP #4. Develop strategies and alternatives. Based on the information received in Step #2 and the analysis completed in Step #3, a financial plan will be developed. And this is why you can see that the keyword for this step is “develop”. Personal financial planning requires the “development” of alternative solutions that can be achieved by you as presented by your financial consultant. It is imperative that you feel comfortable with the recommendations and confident in your ability to reach your financial objectives.

STEP #5. Implementation and monitoring of the financial plan. Upon completion of the plan's analysis and development, the advisor will outline the recommended course of action this means implementing the strategies made in Step #4. And because financial planning is an evolving process, necessary adjustments need to be made. Therefore, professional financial advisors will sit down and reevaluate the financial plans on a periodic basis, taking into account the changes in income, assets or any situation brought about by family or work circumstances.

In conclusion, personal financial planning should be a properly defined and documented process, so it raises the most possible successful outcome for you. You need not have to do all these things by yourself. You need not feel overwhelmed. Contact Carolina Money Minders today and let us help you start things in the right direction!