As a financial life planner, my underlying assumption is that planning is a “good” thing. Planning is widely acknowledged to be a pre-requisite for business success. However, Benjamin Franklin’s advice that “by failing to prepare, you are preparing to fail” frequently falls on deaf ears in the personal environment.

This is usually, in my experience, because people feel they have neither the time nor the skills for personal financial planning; nor do they want to spend money on hiring a professional financial planner. And a few people I have met have such confidence in their ability to make and retain significant fortunes that personal financial planning is deemed unnecessary, even spineless.

So this article is about why financial life planning is important. I will share with you some of the current approaches to planning, show you how to plan in practice and highlight the outcomes.

To plan, or not to plan?

I am passionate about planning because it leads to success. I recall my first sales job in financial services, cold calling to make appointments to sell insurance. I had an excellent manager who made me plan my target market, pitch, call strategy, everything. The first call I made was spot on, leading to an appointment in minutes. I knew it was going to work, my manager knew, my colleagues knew. And it did.

So why should we plan our lives and money? In my view, for four reasons:

1. To develop a practical framework for running household finances

2. To achieve profound goals as fast as possible

3. To ensure long term financial security

4. To deal with life’s setbacks

Lets look at each of these in turn.

1. Financial framework

Many people today lack a financial framework or system. When it comes to expenses, the core of financial planning, we often enter a fantasy world. Even if families can give a reasonably accurate set of current financial statements (assets, liabilities, income, expenditure and estate), they are rarely able to project what those statements will look like ten years, or even five years into the future.

Financial planners will usually tell you that clients come to them for these reasons:

‘We are not fully in control of our finances’
‘I don’t understand money; all I feel around money is fear and anxiety’
‘We don’t know where we are now or where we will be in the future’
‘We seem unable to live the lifestyle we aspire to’
When families do achieve clarity it usually provides great relief, even if the picture does not look good. They at least know where they stand and can take appropriate action.

2. Goals

Unfortunately, we live in an era where wealth is frequently generated for its own sake, rather than as the means to live a fulfilled life. Money is used to make more money – it becomes a proxy for the ego, and financial decisions are often made to protect or massage our egos, not to support the achievement of our deepest life goals.

Life and money are deeply intertwined. Identification of clear life goals is essential to provide direction, and enables sound financial decisions to be made. So when asked to comment on an investment someone is considering, I always pose another question: “Will investing in this product enable you to achieve your goals more quickly and efficiently?” Very often the answer is that it won’t.

3. Long-term security

The impact of increasing longevity on family finances is profoundly important. The keys to addressing this are the Three Drivers of Financial Freedom: savings, compound interest and asset allocation. While saving implies a reduction in spending, and potentially the hijacking of those important and immediate life goals, financial life planning can help to resolve these difficult conflicts between the short and long term.

4. Dealing with the unexpected

Life will have kicked you in the teeth in the past and it will do so again in the future. Accept it, and plan for it. Life can throw a huge range of fastballs at us, from the irritating yet not too serious car breakdown to the death of a close family member. Put in place contingency plans centred around a Security Fund and insurance. No one likes insurance (though I have yet to meet a widow who complained her husband was over insured).

Freedom

What you are really going to achieve from well-formulated goals and a structured, considered life and financial plan to achieve those goals can be clearly expressed in one word – freedom.

Freedom is a central theme of my work, so what exactly is it? True freedom comes from defining and setting boundaries and living a life dedicated to achieving your goals within those boundaries. Greater freedom comes from personal growth, the means by which we can expand our boundaries.

Lianne’s story illustrates this perfectly. A mother of two on a modest salary, Lianne had gone through a difficult divorce and when she first came to me for help, she was consoling herself with a compulsive spending habit.

However, her goals were to love, support and educate her children and to be a really good mother to them to compensate for the breakdown of the marriage. I worked with her to plan her boundaries. We established her life goals, tackled her spending and developed an annual spending plan.

One Monday morning she called me to talk about her weekend. She had taken the girls to London to see a concert and had done so without any feelings of guilt or anxiety over money. It had been in her plan. She had achieved her goal of bringing happiness and fun to her children. Within her boundaries she had achieved real freedom, to be there in the moment with her children, simply to be.

It’s the process that matters

Plans rarely survive contact with reality, to misquote Moltke. Reality for many of us can cause a change of direction. However, the process of planning is as much a benefit as the plan itself, often more so.

There are a number of planning processes around, often developed by professional bodies such as the Financial Planning Association or the Kinder Institute in the US or the Institute of Financial Planning in the UK. My own process is a six-stage process for called FUTURE:

Foundation: a full inventory and analysis of your life, including assumptions and an analysis of your risk profile
Utopia: establishing what you want to have, to do, to be
Transformation: identifying and dealing with the obstructions on the road to utopia
Utilisation of resources: establishing the best option for your existing resources
Roadmap: creating the plan to get you from where you are now to where you want to be
Execution: implementing and living the plan
Having developed a plan it is important that you continue to monitor and renew the plan each year. Planning is dynamic, a habit, not just a couple of sheets of paper to be drawn up then relegated to the bottom draw and forgotten.

The fruits of the process

We all in the financial community trust our processes, because we know they bring results, results that are more than just a written plan.

Initially you will develop a personal inventory of your life. This will include a detailed set of accurate financial statements comprising a schedule of assets, liabilities, income and expenditure, as well as data about yourself and the environments you inhabit.

Self-understanding builds on this base and by the time you are well into the process you should be able to articulate your deepest and most profound goals. In doing so, you will find yourself energised, focused and far sighted.

Finally, you will learn about money. If you are working with a coach or adviser you will have a raft of financial principles and products explained to you. If you are alone on this journey you will need to educate yourself, and there are plenty of resources out there to help.

What is the alternative to planning? Well, you can wing it; with a good deal of chutzpah, a hefty dose of confidence, a wing and a prayer and a bit of carpe diem you might well achieve great things, and get a real thrill and sense of achievement when you do. However, I do believe in the importance of living in the moment. The present is where we can really ‘be’. Crucially, financial life planning will actually help you to achieve this state by removing regrets for the past and fears of the future.

A well-structured plan will give you a thorough understanding

When a person wants the most out of the money they earn, this tool can play a starring role in achieving that outcome. Through careful financial planning individuals or married couples are able to set certain priorities and work toward achieving any long term goals they have set forward. It also provides a bit of a safeguard when it comes to the unexpected, such as income loss, unexpected illness, or work-related injuries.

No two people will look at financial planning the same, because everyone has different ideas regarding what their it will encompass. For some individuals, financial planning means finding investments that will offer security once a person or a couple retires. For other people, it is making investments and saving to have money ready for when children go off to get a university education.

When going about financial planning, it is best to obtain the services of a professional financial planner. Financial planners offer guidance and advice when it comes to any issues regarding financial planning. With life being complicated and sometimes hectic, it can be difficult to find the necessary time to manage future financial affairs. Not only that, but financial planning is often a multi-disciplinary task that “Average Joe’s” are just not capable of understanding. A financial planner will look at the current situation of a client and all future objectives. They will analyze the current financial status of the client and then recommend a financial plan that will suit both present and future needs.

Details of the financial plan may include retirement plan contributions, portfolio of investments, a budgeting plan for all current living expenses, and projected savings growth.

Unfortunately, many people delay in preparing for the future as they are too busy maintaining their current financial situation. No matter what a person’s income level is or their future plans, financial planning is essential to any future goals. With the assistance of a financial advisor, any individual can implement successful financial goals. They will also aid in maintaining the necessary discipline to stick with the plan. And do not worry if there are changes to a personal situation, such as a birth of a child, financial plans are not written in stone. The financial planner will aid in changing things around to ensure everything is properly maintained and a person’s financial future is properly taken care of.

KDK Accountancy Corporation with Katz, Daitzman & Kiesel CPAs, LLP (an Orlando CPA Firm) is an accounting firm offering comprehensive services to Central Florida businesses and individuals. We apply expertise for our clients ranging from setting up day to day accounting systems to preparing the most diverse and complicated tax return.

Our wide range of services include accounting, bookkeeping, tax preparation, ta

Financial planning provides a road map for your financial life. It can make the journey less stressful, more fun, and more successful. And, you can start right now – even if only a few steps at a time.

In today’s uncertain economy, financial planning has become increasingly important. With an overwhelming number of options for saving and investing, managing your finances can be difficult. Creating a financial plan helps you see the big picture and set long and short-term life goals, a crucial step in mapping out your financial future. When you have a strategy and a financial plan, it’s easier to make financial decisions and stay on track to meet your goals. Working with a CFP CM professional can secure your financial wellbeing and give you peace of mind and help you reach financial planning success.

Some people decide to do their own financial planning, but you may want to seek help from a Certified Financial Planner CM professional if you:

Want to better manage your finances, but aren’t sure where to start.
Don’t have time to do your own financial planning.
Want a professional opinion about the plan you’ve developed.
Don’t have sufficient expertise in certain areas such as investments, insurance, taxes or retirement planning.
Have an immediate need or unexpected life event.

Destination: Setting Goals
Financial planning starts with setting goals. After all, you need to know where you want to go before you can decide how to get there. Your goals can be short-term – for example, paying a credit card debt in six months; medium-term – such as saving for a down payment on a house in two years; or long-term – such as sending your kids to college in 15 years or your retirement. Write your goals on paper, including rupee terms and dates. Keep the list in sight so you can refer to it for motivation as you keep working toward your goals.

Starting Point: Where Are You Now?
Next, get a realistic picture of where you are financially. List everything you owe (liabilities) and the value of everything you own (assets). Also, track your monthly income and expenses in a notebook or on a budget form. Even if it’s not a pretty picture now, that’s OK. You’ve faced your financial situation, and financial planning will help you improve the picture.

Avoiding Potholes: Insurance, Debt, Job Loss, Taxes and Estate Planning
Financial potholes will inevitably come your way – stock market downturns, recessions, losing a job, wrecking the car, paying for an illness. You may not be able to avoid these potholes, but you can minimize their financial impact. Here are a few suggestions:

• Have adequate insurance. Insurance prevents financial catastrophes, so don’t put off getting it. Insure what you cannot comfortably afford to replace. For most people, that means having the following insurance: auto, renters or homeowners, liability, health, disability and life insurance (if someone depends on you financially). Take advantage of insurance offered to you at your job and supplements it with insurance you buy on your own. Shop for the best price, but make sure you buy from a reputable, financially sound insurance company.

• Control debt. Having a lot of debt puts you at financial risk. If you’re spending more than you earn, start using a budget to plug spending leaks, and make paying off your credit cards a top priority.

• Job loss. You can’t control the economy or a company layoff, but you can control how much time you invest in keeping your skills sharp and in meeting people who may help you find a job in the future.

• Taxes. Computer software can help you find deductions on your tax return. However, if your financial situation is complex, you may benefit from working with a tax or financial professional who can suggest tax strategies and make sure you are getting all of the credits and deductions due to you.

• Estate planning. Every adult should have these four basic documents: will, general durable power of attorney, medical power of attorney and a living will (also called a medical directive). A financial planner can guide you and refer you to an estate planning attorney to draft these documents.

There are many benefits of financial planning. If any of the above questions apply to you, it may be time to call a Certified Financial Planner CM professional to help you reach your financial goals and achieve financial success.

In other words, it is the process of meeting once life goals through proper management of one’s finances. Life goals can include buying a home, saving for children’s education,buying a car, protecting family against financial risks or planning for retirement. The need for financial planning arises from the need of meeting the financial goals of one’s life & it helps us to take a comprehensive look towards one’s futures financial needs and goals including cash flow, debt management, education funding, retirement planning, estate conservation and portfolio management. It also gives you the direction to make informed decisions about your investments so that you won’t make any mistakes and you can reap the benefits of your planning for the rest of your life.

Financial planning(FP) is simple mathematics. There are 3 major components:

Financial Resources (FR)
Financial Planning Tools (FT)
Financial Goals (FG)
When you want to maximize your existing financial resources by using various financial tools to achieve your financial goals, that is financial planning.

FP: FR + FT = FG

Benefits of Financial Planning:

Financial Planning ensures that the right amount of money is available in the right hands at the right point of time in future to achieve specific Financial Goals. Virtually anyone with moderate wealth or a decent income can avail the benefits of financial planning like:

It is based on individual risk profiling, and it provides a road map to achieve financial goals
It helps you take a ‘big picture’ look at your financial position and it guides you to examine your current financial status and determine objectives.
It helps in devising a strategy or plan for how you can meet your goals given your current situation and future plans. It also identifies weaknesses and recommends improvements.
It puts in place the risk management system to meet uncertainties of life through efficient Insurance Planning, Tax Planning and Estate planning.
It is the process of managing your money to achieve personal economic satisfaction. It allows you to control your financial situation and provides a feeling of security and less stress.
It is a disciplined approach to managing your finances to reach life goals. It involves systematic & disciplined investment mechanism, which helps in creating wealth over a period of time. It helps you to become more responsible towards disciplined investing.
Financial Planning Process:

The Financial Planning Process consists of six steps, using which, you can work out where you are now, what you may need in the future and what you must do to reach your goals.

Step 1: Determine Your Current Financial Situation
Step 2: Develop Financial Goals
Step 3: Develop various alternatives
Step 4: Evaluate Alternatives