Six-Step Financial Planning Process
Step 1. Evaluate your current financial situation
Everyone's situation is different. You should explore questions such as the following:
- What are your income sources and expenses?
- What types of investments do you have?
- What lifestyle do you want now?
- What is your net worth?
There are as many different goals as there are individuals. To get a true understanding of your financial aspirations, you can ask yourself these questions:
- Are you saving to buy a house, or a bigger house?
- What are your hopes and dreams for retirement?
- Have you put aside money for a rainy day?
- Do you need to provide for your children's education?
- Where do you want to be, financially, in 10 years? In 20 years?
Now determine whether your current actions will allow you to achieve your goals. If not, there are changes that need to be made to get you there.
Step 4. Recommendations and Plan
You can help yourself get your financial plan off to a good start by:
- choosing investments specific to your needs
- maximizing your tax sheltering opportunities
- guarding your plan against unforeseen risks
- building a dependable retirement income
- getting the information you need to make sound financial decisions.
Step 5. Implementation
The best time to set your plan into action is right now. It's never too early, and certainly never too late, to begin. Plans that sit on the shelf don't accomplish anything.
Step 6. Ongoing Review
It's best for you to review your financial strategy on a regular basis to ensure you continue to meet your financial goals. As your situation changes, your goals and needs may also change. Adjustments to your personal plan can be made along the way since to be truly effective, a financial plan must stay up-to-date.