ASSOCIATE FINANCIAL PLANNER Broker - Financial Services, Wealth Academy Trainer(International Marketing Group) Computer Professor, De La Salle - College of St. Benilde , OB Montessori Center, FEU, Hope Academy, St Mary's Academy, Western Colleges

Home » Post Item » PLANNING YOUR FINANCIAL FUTURE

PLANNING YOUR FINANCIAL FUTURE

November 8, 2009

by: Rex Mendoza
http://www.rampver.com/financial_planning.php

Financial planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a home, saving for your child’s education or planning for retirement. Most people live their life taking each day at a time and are not conscious of having their financial lives mapped out. This perspective can bring future regret, disappointment, and frustration as they discover that their dreams can not be realized and they do not have enough time to put things on track. The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans.

The Benefits of Financial Planning

Financial planning provides direction and meaning to your financial decisions. It allows you to understand how each financial decision you make affects other areas of your finances. For example, buying a particular investment product might help you pay off your mortgage faster or it might delay your retirement significantly. By viewing each financial decision as part of a whole, you can consider its short and long-term effects on your life goals. You can also adapt more easily to life changes and feel more secure that your goals are on track. Having a plan helps you avoid making wrong financial decisions. With a plan, your choice of investments, lifestyle, and accumulation program will be matched to your goals, risk appetite, and time horizon.

Common Mistakes People Make When Approaching Financial Planning

Not setting measurable financial goals.
Confusing financial planning with investing.
Making financial decisions without understanding its effect on other financial issues.
Thinking that financial planning is only for the rich.
Assuming that financial planning is required only in advanced ages.
Thinking that financial planning is the same as retirement planning.
Waiting until a money crisis happens before crafting a financial plan.
Expecting unrealistic returns on investments.
Thinking that using a financial planner means losing control.
Believing that financial planning is primarily tax planning.
Neglecting to re-evaluate financial plans periodically.

How To Make Financial Planning Work For You

You are the focus of the financial planning process. As such, the results you get from crafting your own plan or through working with a financial planner are your primary responsibility. To achieve the best results from your financial plan, you will need to be prepared to avoid some of the common mistakes shown above by considering the following advice:

Set measurable financial goals. Set specific targets of what you want to achieve and when you want to achieve results. For example, instead of saying you want to be “comfortable” when you retire or that you want your children to attend “good” schools, you need to quantify what “comfortable” and “good” mean so that you’ll know when you’ve reached your desired milestones. It always pays to “put numbers” on your goals.

Understand the effect of each financial decision. Each financial decision you make can affect several other areas of your life. For example, an investment decision may have tax consequences that are harmful to your estate plans. Or a decision about your child’s education may affect when and how you meet your retirement goals. Purchasing a luxury car can set you back on another target. Remember that all of your financial decisions are interrelated.

Re-evaluate your financial situation periodically. Financial planning is a dynamic process. Your financial goals may change over the years due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth, house purchase or change of job status. Revisit and revise your financial plan as time goes by to reflect these changes so that you stay on track with your long-term goals. Remember that plans do not mean a thing unless you monitor your progress on a constant basis.
Start planning as soon as you can. Don’t delay your financial planning. People who save or invest small amounts of money early, and often, tend to do better than those who wait until later in life. Similarly, by developing good financial planning habits such as saving, budgeting, investing and regularly reviewing your finances early in life, you will be better prepared to meet life changes and handle emergencies.
Be realistic in your expectations. Financial planning is a common sense approach to managing your finances to reach your life goals. It cannot change your situation overnight; it is a lifelong process. Remember that events beyond your control such as inflation or changes in the stock market or interest rates will affect your financial planning results.

Realize that you are in charge. Whether some people are advising you on the process or you are at it on your own, it’s still your life. You should always take personal responsibility for results

Posted by jaygalang at 12:07 am | permalink

All comments are moderated. Your comments will not appear here unless approved by the blog owner. Thank you.

Add a comment