What is a financial plan?
A financial plan is a document that covers your overall financial situation and long-term monetary goals, as well as outlines strategies for reaching those goals. In other words, it is a roadmap for your financial journey that guides you through different stages of your life. This document helps you keep track of your assets, income, and expenses, enabling you to manage your money and achieve your goals.
Why you should go through financial planning
Financial planning eliminates your stress about money, provides for your current needs, and helps you save for your long-term objectives, including retirement. A holistic financial plan helps you make the most of your assets, as well as ensure that you meet your goals.
Practical benefits to financial planning
- Choose investments that align with your personality, needs, and goals. A financial plan is built upon your circumstances and objectives and reflects your risk tolerance.
- Manage your income more effectively. You can figure out how much to allocate for tax payments, other monthly expenses, and savings.
- Increase your cash flow by monitoring your spending patterns. Careful budgeting and prudent spending along with optimized tax planning help you keep more of your earnings.
- Plan for retirement, including how much you need to save, as well as how much you can spend in your post-paycheck life.
- Provide for your family’s financial well-being. Having the appropriate beneficiaries and account structure in place allows you to rest easy.
- Protect your family and relatives — prepare a safety net for them should anything happen.
- Have a plan for a variety of “what if” scenarios. An ongoing process, financial planning adapts to your needs as your financial situation changes over time, whether it be retirement, new job, loss of a loved one, marital status, etc.
Goal-oriented financial planning
Financial planning goes beyond growing your savings and cutting your expenses — it encompasses multiple goals:
- Retirement planning
It is important to plan for retirement if you don’t want to run out of money in your golden years. A successful retirement plan helps retirees become financially independent and live comfortably.
- Education planning
Having an education plan helps you structure your finances better, and it also teaches your children how to prioritize their expenses.
- Tax planning
Planning your taxes properly allows you to have more money in retirement and afford the things you want.
- Estate planning
Developing an estate plan and adding beneficiaries to your accounts not only simplifies things for your heirs — it results in better investment choices, lower costs, and less paperwork.
5 steps to a solid financial plan
- Understand your current financial situation. Assess your income, savings, debt, and expenses.
- Define your goals. Maybe you want to maintain your current standard of living in retirement? Or buy a car every 5 years? Downsize your home in the future, go on more vacations, fund your child’s college or wedding — think about the things that are important to you.
- Work with a financial planning professional. This person can assess how realistic your goals are and develop recommendations on how much you need to save and how to invest your money wisely.
- Implement your financial advisor’s recommendations. Your financial advisor will assist you in applying your plan to practice and will monitor your progress.
- Review your financial plan regularly. Your financial planner will help you ensure that you stay on target and make any necessary adjustments if needed.
Signet can help
We’ve discussed the benefits of a financial plan above and why it’s important. So what are you waiting for? Signet Financial offers our clients a FREE comprehensive financial plan as part of our services! Contact your Signet Financial advisor today and ask how we can help get you started on the road to building a solid financial plan that is customized to you and your needs.