The Basics About Financial Planning and Financial Advisors

Financial Planning

 Brian King By: Brian King

Planning for a strong financial future and achieving your financial goals requires developing a comprehensive strategy. A well-built plan will typically involve both short-term and long-term goals, and will also take into account unexpected events that could otherwise negatively impact your financial status. The primary driver for most families' financial plans is a comfortable retirement and the ability to pass on a legacy to the next generation. To ensure efficient retirement planning, you must take a good look at your current finances and your expectations for the future.

Financial planning isn’t something you can learn overnight, and many of the best planning opportunities require an ongoing understanding of everything from tax law to employment benefits. Without sufficient knowledge of everything involved, you could be doing yourself a disservice by missing important opportunities or making financial mistakes. Consider the following if you want to learn how to start financial planning.

What Is Financial Planning?

Think of personal financial planning as though you were putting together a road map with specific financial destinations. Before starting your journey, you must assess your current location (your current financial state). Then, you must determine what additional resources you might need to reach each destination on your road map (each financial or life goal).

Your plan will need to take into account many components. This includes your savings, debts, benefits, investments, and anything else that could impact your financial state now or in the future like starting a family or business. The most common misconception is that financial plans are a one time project. The truth is the process is not static, requiring ongoing evaluations and calculations throughout much of your life. Often, strategies may need to be adjusted in response to changing economic, personal, or market conditions. What worked even a decade ago is now likely missing opportunities.

While many people might attempt this journey on their own, successful personal financial planning is often best achieved with the aid of a professional. By making the journey with a financial planner at your side, you gain an experienced co-pilot who can make the trip much less stressful and improve your chances of reaching each goal. Financial planning is part of what sets Wealth Management apart from basic advice, as it will proactively help you look ahead to achieve financial independence.

The Financial Planning Process

Knowing how to start financial planning or retirement planning is one thing — moving forward with developing and executing a plan is another. There are guidelines that must be followed if you want your personal finance plan to have the highest chances of success. Some parts of the process can be done right away, such as making a budget or executing a will. Other parts, such as building up emergency savings, honing an investment strategy, or paying off debts, take time.

The beginning of the financial planning process typically involves taking a comprehensive look at your financial situation. Then, you must determine your short-term and long-term financial goals. This includes everything from purchasing a home to paying for a child's education. Digging in means you don't just simply say "I'd like to retire," you start to attach specifics like at what age and carrying what lifestyle. With a solid destination in mind, you can better put together a plan that will actually help you get there. 

If this all feels like something you can do on your own, consider this scenario. Whether your goal is to retire comfortably or purchase a vacation home by the age of 50, one of the ways in which you might achieve your goals is through investments. But what does that really mean? How much should you be saving and investing, what allocation models make sense for your goal, how will those investments impact your taxes, and how will you know you're on the right track? If you aren’t familiar with the many types of investments you can add to your portfolio or the different types of financial plans that can be created, it is advised that you consult with a CERTIFIED FINANCIAL PLANNER® (CFP). The reality of what it takes to achieve your goal could lead you to a different saving or investing pattern, or to right-size the goal.

How To Start Financial Planning

One of the key aspects of personal financial planning is simply setting realistic goals. First, consider your current budget before making any expectations. If you don't think you can achieve your goals with your current financial situation, it may be possible to significantly improve your financial life by cutting unnecessary expenses or paying off debts. 

Make a list of what you hope to achieve, such as paying off a high-interest credit card, building retirement savings, or paying for college for your children. Consider your cash flow, future medical and insurance coverage costs, and what your expenses might be in the future after retirement.

These are some of the basics of knowing how to do financial planning, and they will ultimately enable you to build the right type of financial plan. It’s also important to remember that it is never too late to start personal financial planning. Starting early is great, but the most important thing is to start.

You might also wonder, what is different when financial planning for a business? If you have a business and want to ensure it maintains a strong financial future, financial planning can also be an instrumental tool. Much like personal financial planning, business financial planning involves analyzing the current and future financial status of your business to best develop a plan of action.

Financial Planning Checklist

So, what does a financial plan look like? For starters, it will include the essentials:

  • Your monthly budget
  • A plan to pay off debt
  • A plan to build your emergency fund
  • A list of insurance coverage
  • Savings breakdown (simple savings accounts, 401(k), IRA etc.)

Additionally, a solid financial plan will include a portfolio of investments, retirement savings plan(s), and a plan to pay projected taxes.

Despite what you have heard, estate planning is an important part of every financial plan. The difference is how complex this plan may be. This is important for families and loved ones, as it will determine what happens to your assets when you're gone. Whether your plan is as simple as confirming a transfer on death or more complex, outlining property, inheritance, and your care wishes, this needs to be considered.

Even if you have a good idea of how to start financial planning, the process doesn’t end there. Your plan must be consistently reviewed and should grow alongside your life. The financial plan of a single person in their 20's isn't the same financial plan that gets a married couple in their 50's over the finish line to a comfortable retirement. That’s why working with a financial planner for your planning services can be a very wise choice for your financial future, they can serve as a proactive voice making sure you stay focused on where you'd like to end up, not just what got you to this point. If that isn't in the cards for you yet, check out this financial planning checklist on our blog.

What Does a Financial Planner Do?

Put simply, a financial planner helps individuals and businesses formulate long-term strategies for managing and building wealth.

Whether working with a single Wealth Manager or an elite team at a firm, Certified Financial Planners® (CFP) can be an important voice, providing knowledgeable advice on a number of financial matters. They can help you better understand much of the confusing jargon and help you navigate the roadmap of ever-changing tax laws. Ultimately, a financial planner will teach you how to manage your finances better so that you can continue to make wise financial decisions no matter what stage of life you are in.

At Plancorp, we tend to help those who feel like they have outgrown basic financial advice. We offer a team of professional Wealth Managers to help you proactively develop a plan for any financial situation you are facing now or planning for in the future. After analyzing your finances, the Wealth Manager can use detailed analysis and financial projections to paint an accurate picture of your finances. Then together, we can move forward to ensure those financial goals become a reality by maximizing opportunities and minimizing risks along the way.

Are you ready to learn more about financial planning? Contact us for a financial analysis or to schedule a consultation. Our elite team of Wealth Managers and financial professionals will help you identify areas that need your focus. Let us help you to make the right decisions with your money and reach your financial goals.

New call-to-action


Related Posts

Brian King joined the Plancorp team from PricewaterhouseCoopers, LLP in 2008. Now our Chief Planning Officer, he brings his advanced income tax and estate planning experience to Plancorp’s family office practice, where he helps families understand, grow and preserve their wealth. More »