Financial Planning

Financial planning is the process of meeting your lifestyle goals through the proper management of your finances and leveraging investment cycles. Lifestyle goals can include buying a home, saving for your child’s education or planning for retirement.

The financial planning process consists of steps that help you take a “big picture” look at where you are financially. Using these steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals.

The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans.

Financial planning provides direction and meaning to your financial decisions.

It allows you to understand how each financial decision you make affects other areas of your finances.

For example, buying a particular investment product might help you pay off your mortgage faster or on the negative side, it might delay your retirement significantly.

By viewing each financial decision as part of a whole, you can consider its short and long-term effects on your lifestyle goals.

You can also adapt more easily to lifestyle changes and feel more secure that your goals are on track.

The Financial Planning Process consists of the following 5 steps:

• 1. Gathering client data, including goals. (Detailed fact-find review)
     • The financial planner gets appropriate information about client’s financial situation e.g. income, commitments etc
     • The client and the planner should mutually define the client’s personal and financial goals, understand the time frame for results and discuss, if relevant, how the client feels about risk.
     • The financial planner will review all the necessary information before giving the client the advice he / she needs. All need to bear in mind that, this is a long term project 2-3 years at the minimum, typically.
  2. Analyzing and evaluating the client’s financial status.
     • The financial planner will analyze the client information to assess his/her current situation and determine what the client must do to meet his/her goals.
     • This will include analyzing the assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.
  3. Developing and presenting financial planning recommendations and/or alternatives.
     • The financial planner will offer financial planning recommendations that address the client’s goals, based on the information provided.
     • The planner will go over the recommendations with the client to help the client understand them so that he/she can make informed decisions.
     • The planner will take into account the client concerns and revise the recommendations as appropriate.
  4. Implementing the financial planning recommendations.
     • The client and the planner should agree on how the recommendations will be carried out.
     • The planner may carry out the recommendations or serve the client as his/her “coach,” coordinating the whole process and where appropriate include other professionals such as attorneys or stockbrokers.
  5. Monitoring the financial planning recommendations.
     • The client and the planner should agree on who will monitor the progress towards achieving the client’s goals..
     • If the planner is in charge of the process, she or he will report to the client periodically to review the client’s situation and adjust the recommendations, if needed, as the client life changes

Individuals will go through various life stage, in which their investment needs and objectives are different.

There are 3-phases

• Age: 20-30s
• Age: 40-50s
• Age: 60-70s

Accumulation Phase (20-30s)

• This a critical phase for accumulating assets to satisfy immediate or future financial needs
• Getting started early pays off due to the power of compounding