Maybe you are just starting out with that first real job. You might be married for only a few years and have one or two small children. On the other hand, you might have worked for 10 or 15 years. Retirement, children heading to college or other issues might be looming.
It does not matter where you are in life, financial planning can help.
Financial planning involves:
· Determining your current financial position, which takes into account debt, net worth, insurance protection, standby or emergency funds, disability protection.
· Defining what your financial issues and concerns are, touching on issues such as debt reduction, saving for a new or second house, college funding, retirement and investment choices.
· Prioritizing your financial issues and determining when financial events will occur, thinking of college in 10 years, retiring in 15 years, etc.
· Gathering data needed to analyze your financial issues, such as tax returns, check stubs, bank accounts, investment accounts and wills.
· Analyzing the data and putting the information in a logical order.
· Making specific recommendations, such as investing $300 per month for a child’s education, saving $14,000 per year in a 401k, buying $300,000 of life insurance or changing your current investment portfolio.
· Implementing the plan.
· Monitoring the plan to make sure you are on target and making adjustments based on changes like a new job, an influx of funds due to inheritance, a change of mind about when to retire, a sale of assets, a sale or purchase of a business, etc.
Planning issues can be basic or complicated. Time horizons may be short, medium or long. Your level of risk regarding investments may be at a high, moderate or low level. Retirement could be in just a few years or 15 to 20 years away.
Getting the assistance of a professional can help. While looking for educational and planning credentials such as the certified financial planner certification can be useful in screening professionals, finding someone you can trust is an important selection criterion.
A financial adviser is more than an investment adviser; he or she should be able to assist you with all stages of your financial life and should be familiar with estate planning and long-term care issues.
The bottom line is, do not put off developing and implementing a financial plan. At the very least, you owe yourself and your family a financial checkup. The financial checkup can assess your degree of financial fitness.
Submitted by Roy Wells, a financial planner who works for Waddell and Reed in Kenai.
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