Much attention has been paid in recent years to the mounting concerns over the saving and spending habits of Americans. Not long ago, the Department of Commerce reported a negative savings rate for American consumers. Studies show that even as more workers contribute significant pre-tax dollars to their 401(k) plans, consumer debt is nearing an all-time high.
It's evident that too many Americans are neglecting long term financial planning. Like closing the door of a closet that badly needs organizing, the attitude seems to be out of sight, out of mind. Concern is particularly real for members of the baby boom generation.
Already between 50 and 65, around the corner from or on the door step of traditional retirement age, many baby boomers are facing the undeniable need to re-evaluate their financial preparedness. Financial planning can help these individuals meet financial goals and get serious about retirement planning through the proper management of their assets.
However, not all financial advisors are created equal. A financial planner who develops a comprehensive and personalized financial plan will take a holistic view of an individual's financial resources, obligations, and goals.
The following information will help you understand Comprehensive Financial Planning and how it can help you reach your goals:
What is Financial Planning?
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.
The financial planning process, consists of six steps that help you take a "big picture" look at where you are financially. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals.
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.
Can you do your own Financial Planning?
Some personal finance software packages, magazines or self-help books can help you do your own financial planning. However, you may decide to seek help from a professional financial planner if:
- You need expertise you don't possess in certain areas of your finances. For example, a planner can help you evaluate the level of risk in your investment portfolio or adjust your retirement plan due to changing family circumstances.
- You want to get a professional opinion about the financial plan you developed for yourself.
- You don't feel you have the time to spare to do your own financial planning.
- You have an immediate need or unexpected life event such as a birth, inheritance or major illness.
- You feel that a professional adviser could help you improve on how you are currently managing your finances.
- You know that you need to improve your current financial situation but don't know where to start.
What is a Financial Planner?
A financial planner is someone who uses the financial planning process to help you figure out how to meet your life goals. The planner can take a "big picture" view of your financial situation and make financial planning recommendations that are right for you. The planner can look at all of your needs including budgeting and saving, taxes, investments, insurance and retirement planning. Or, the planner may work with you on a single financial issue but within the context of your overall situation. This big picture approach to your financial goals may set the planner apart from other financial advisers, who may have been trained to focus on a particular area of your financial life.
To talk about your financial planning needs please contact David Gill, Jr. CPA at 856-722-5300 ext. 210 or Jim Rogers, CPA, CFFA, CFF at ext. 203.
