Financial planning is an ongoing process, during which new information and life events often change the course of your plan. The discussions that follow are based on Ethan and Isabella's lives today, and the information that they provided. Some of the recommendations will be very specific, others more vague. This approach is based on the assumed evolution of their personal and financial situations.
Data Gathering & Assumptions
From a planner's side of the desk, it's important to start at the beginning. Financial planners and clients typically mutually define a client's personal and financial goals, needs and priorities. The next step is what financial planners call the data gathering: Financial planners will obtain all the quantitative information and documents about a client before any recommendation is made and/or implemented. More>
Cash Flow
Another important document needed is the statement of cash flow. The cash flow statement typically reflects a household's annual income less its discretionary and nondiscretionary expenses. As is often the case, many of your short- and long-term goals are dependent on your ability to effectively manage your cash flow. Finite income sources pose challenges to every budget, and living within one’s means is essential to a financially stable lifestyle. More>
Short-term Goals
In the beginning, you will likely start saving cash to a savings account or money market account that will be multi-purpose. Some of that cash may be needed for a home purchase, some for an engagement ring purchase or wedding costs. This fund would also be considered your emergency reserve fund for unanticipated expenses. As you become more comfortable with the savings plan, you can begin to increase the monthly amounts dedicated towards your goals. More>
Long-term Goals
The most important step is that you are actually saving from your income towards these goals, and that the money is building up for future use. These savings habits will be used to begin putting money away towards your long-term goals, including education and retirement. More>
Asset Protection
Asset protection is an area where diligence and a continual focus are important. Many of the solutions can be very cost effective, but the amounts and types of insurance needed will be ever-changing. For example, when you finally buy your house, renter’s insurance will no longer be necessary and will be replaced with a home owner’s policy. Working with a financial planner along the way will help you to answer the myriad of questions that will undoubtedly arise. More>
