What is Financial Planning?
Regardless of your net worth or income level, identity, or abilities. Financial planning is LIFE planning.
Financial planning is for anyone.
The Six Key Components of Financial Planning
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Financial management
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Mastering financial, economic and cash flow/ debt management concepts.
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Investment planning
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Building a portfolio, including different investment vehicles, diversification and risk management.
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Tax & estate planning
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Understanding laws and management techniques around taxes, property transfer and estates.
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Retirement savings & income planning
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Performing retirement needs analyses, evaluating retirement income plans, and understanding the integration and timing of pensions and assets at retirement.
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Insurance and risk management
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Evaluation of risk and assessing different types of insurance, from life to disability to health.
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- Psychology and behavioural planning
- Addressing client behaviour and attitudes related to financial planning.
Not all of these items may be pertinent or as important to you, depending on the phase of life you find yourself in. However, they are all interconnected, and do need to be considered with respect to each other.
Financial planning is integrated financial management.
The Six-Step Financial Planning Process
Working with a professional
Determine the scope of how you will work with your financial professional. A formal engagement letter outlines responsibilities and timeilnes.
Develop the strategy
Your CFP provides a clear, written strategy with recommendations based on your situation and objectives, structured without emphasis on product purchases.
Identify goals and objectives
Determine your financial goals, your personal goals, your needs and priorities. This helps your CFP recommend the most suitable strategies for your unique situation.
Implement strategies
Implement your strategy with agreed actions, responsibilties and time frames. A financial plan is only helpful if the recommendations are put into action.
Analyze your current situation
Collect and analyze your financial data including income information, investment statements, tax returns and life insurance. Identify areas that create barriers to your objectives.
Monitor and review
Periodic reviews (at least annually) and revisions of your plan helps to ensure your goals are achieved, and ensures that you remain on track as your life changes.