Financial Planning

What is financial planning anyway?  It sounds important, yet hard to define.  When it’s hard to define, it’s hard to figure out why it’s important.

And who does it?  Where do you go to "get" a financial plan, even if you decide you know what it is and you want one?

These questions explain why so many of us don’t have a financial plan.  But would the companies or organizations we work for try to operate without a financial plan?  Would they be successful 20 years from now if they didn’t have one?  Of course not.

So what is an earnest professional supposed to do?  Well ... nothing is definitely not the answer.

There are some companies that play with the idea of financial planning.  The irony is, the only companies that do financial planning provide it to people who don’t really need it (the wealthy).  We’ve all seen the ING commercials where people walk around with 7-figure “numbers”, which are supposed to represent the amount of money you need to retire.  The idea of having a “number” is interesting, but hardly financial planning.  If you try to “Talk to Chuck” about financial planning, you may find someone to talk about investment planning (if you have enough money in your Schwab accounts), but nothing more.

How is investment planning and financial planning different?  Well, how is advertising different than marketing?  Advertising is part of the marketing puzzle, but hardly an end to itself.  Investment planning is an important part of financial planning, but it is only a part.  Financial planning should answer these 6 questions:
1.  What are my financial and life goals?
2.  What financial resources will I need to achieve those goals, and when will I
need them?
3.  How much should I save, and how should I invest to meet these goals
4.  Do the following 3 things fit together well, or are they inconsistent with one
another?
a.  My personal profile
b.  My tolerance for risk
c.  My financial goals
5.  What do I need to do to protect my assets and my lifestyle as I am trying to
achieve my goals, should the unexpected or unfortunate happen?
6.  What kind of flexibility does my financial situation give me if I want to dream
bigger or take on more costs (retire earlier, one spouse work less, have
another child, donate to charity, travel the world, etc.)

That’s what good financial planning should do.  Now you can place a value on it and decide if that is something you want.  The good news is: it is now available to you, not just those who really don’t need it.
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