October is National Financial Planning Month
Picture Your Ideal Future
What do you imagine? Are you relaxing by the ocean, touring Europe, perhaps joyriding in a sports car or enjoying dinner with friends and family in your dream home?
Is Your Money Supporting Your Life & Business Goals?
Whatever wonderful scenario you envision, you will need smart financial planning to set yourself on the path to living the life you want.
How do you go about getting a financial plan?
Read on for the 5 W’s (Why, What, When, Who, and Where) of beginning your road to great financial planning!
Why do I need a financial plan?
Have you ever been caught unprepared or stuck in an emergency situation? Most of us have at one time or another and hate the feeling. Being unprepared for life's unexpected events can lead to even more problems than initially presented. But, with a financial plan you can minimize the risk of finding yourself in a financial situation that you aren't prepared for such as an appliance needing repair or replacement, a sudden and costly trip to the emergency room, loss of a job or extra income, etc. Having a financial plan helps keep you financially prepared for life’s misadventures as much ass possible.
Financial planning also helps you reach your life goals, such as saving for college tuition for your child(ren), taking an amazing trip overseas, buying your dream home, charitable giving, and anything else you can imagine. By knowing how much you have, planning for how much you may have in the future and making smart saving and investing decisions, you can enjoy the life experiences you desire.
Ok. So what exactly is a financial plan?
Financial planning, according to http://www.fpamn.org, “is the long-term method of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life.” Simply put, you are creating a plan that will tell you how to spend and save your money to reach your goals. Now along the way to your goals, there may be some roadblocks you will encounter, but that’s okay... because with a good financial plan you will be prepared for them.
When should I create a financial plan?
Yesterday! It is never too early to create a financial plan. If you earn an income of any amount, you should have a financial plan. It will help you to focus on your goals while saving for the unexpected. I believe strongly that students should be taught financial literacy in our school systems and should begin at least preliminary financial planning in high school with the guided help of parents, teachers, counselors and any other trusted adult (here is a link to a fun resource for getting high school and college age students aware of finances.)
You can start right now by thinking about your personal financial goals and your business financial goals. Now think about the recent setbacks or accomplishments you have experienced toward reaching those goals this past year. Can you remember them all clearly? If you can’t then you can’t account for possible future setbacks or goal setting for the next year. When you are attentive to your financial plan early on you give yourself more time to reach your goals in an effective way. Time is the one thing we can never get back, so starting a financial plan as soon as possible is best for both personal and business goals.
Who can help me build a financial plan?
Building an effective, well-managed financial plan is your best bet and there are wonderful people who enjoy helping others to create a plan that works for them. They are certified financial planners (CFP’s) and many will help you not only build a plan but will also monitor and manage it with you. Some certified public accountants (CPA’s) may serve as financial planners as well. Here is a resource for finding a CFP in your area. Note that some CFP’s will designate that they work with those who have a minimum investible asset amount of money. Investible assets are just the money you have to plan with such as current bank balances, retirement fund accounts, certificates of deposit (CD’s), stocks, mutual funds, etc. If you own a business, asking your CPA for a reference, if they don’t do financial planning themselves, would be a good place to start.
If you are interested in personal financial planning, getting some general information together about your finances and reading this wiki-how is a good place to start. As your life includes more financial intricacies, such as significant salary increase, starting a business, etc. you may want to find a good CFP or CPA to help you. Generally, you may meet with your CPA or CFP once or twice a year to check in about your financial plan and progress. You also want to meet with them whenever you have a significant life change, such as a new baby, buying/selling property, marital status change, new retirement account, job change, etc.
Where can I find more information about building a financial plan?
Investopedia has great informational articles about financial planning such as this one about financial and retirement planning. Also, letsmakeaplan.org, as previously mentioned, is a good place to find more information. However, with the ever-expanding internet, there is plenty of information that can help you understand general financial planning. I highly recommend you meet with your CPA or a CFP if you have any questions or concerns about your finances and financial planning needs.
BONUS TIP:
If you’re a small business owner thinking about creating a solid financial plan for your business, you can turn to your bookkeeping professional for advice in addition to your CPA. They should be able to help you find a CFP as well as will assist you with at least part 1 of the step-by-step Wiki How on creating a financial plan (see references below) since they are already helping you keep track of your finances.
Remember, October is national financial planning month. So grab a cup of pumpkin spice coffee (or whatever warm, flavored beverage you enjoy) and happy planning!
References:
The Financial Planning Association of Minnesota http://www.fpamn.org
Wiki-How: https://www.wikihow.com/Write-a-Personal-Financial-Plan
Let’s Make a Plan. org http://www.letsmakeaplan.org