What is Financial Planning?

Financial planning is all about creating plans for your future. It focuses on how you'll handle your money and get ready for any costs or challenges that might come your way. So, the first step is to take a good look at where you stand financially. Then, you’ll want to think about what you want to achieve. After that, it’s all about coming up with some solid recommendations and putting them into action.

Synonyms

• Financial Management
• Budgeting
• Financial Strategy
• Economic Planning

Benefits of Making a Financial Plan

• It helps to establish important short- and long-term financial goals upon which you can base your investment planning.
• It helps to clarify the actions required to achieve your various financial goals.

Types Of Financial Planning

Here are eight typical services that are commonly provided as part of financial planning:

1. Tax Planning

Financial planners can be the only option when it comes to taxes. They are the ones to help you tackle tax issues head-on and also, help you to find ways to increase your refunds and keep your tax bill as low as possible. Plus, some advisors can even roll up their sleeves and help you prepare your taxes and file your annual taxes.

2. Estate Planning

Estate planning is about making life easier for your loved ones after you're gone. Which often includes preparing a will, which your financial planner can help you with. Plus, it ensures you're ready for any estate taxes that might come your way.

3. Retirement Planning

You probably want to stop working someday and enjoy life without worrying about work. Retirement planning services are here to help you get ready for that moment, making sure you’ve got enough money to live your dream lifestyle when you retire.

4. Philanthropic Planning

Giving to those in need or supporting a cause you care about feels great. Smart financial planning can make sure you're doing it right and getting the tax benefits you deserve.

5. Education Funding Planning

If your kids or other dependents plan to go to college, you may want to help them cover the costs. With some smart financial planning, you can make sure you're ready to support them.

6. Investment Planning

Financial planning doesn’t always mean managing your assets directly but it often does. Even without that, it can still give your investment portfolio a boost by helping you figure out how much to invest and where to put it.

7. Insurance Planning

A financial planner can help you figure out your insurance needs. Some of them are also licensed to sell insurance but keep in mind they might earn a commission from the sale, which could create a conflict of interest.

8. Budgeting 

This is important financial planning. A good planner helps you spend within your means and keeps you from falling into debt.

How to Make a Financial Plan

Here are the three essential ways to make up a financial plan

1. Calculate Your Net Worth

Take a good look at everything you own, like your home, car, savings, and investments. Now, add up what you owe, like loans and credit card balances. The difference is your net worth. Once you’ve got a clear picture of where you stand, you’ll be ready to map out your next steps.

2. Establish Financial Goals

When setting your goal you should think about including things like funding education, covering healthcare costs, setting up an emergency fund, planning for retirement, and putting together an estate plan. 

3. Monitor Cash Flow

Figuring out this part of a financial plan can be pretty tough. A lot of us don’t really keep track of every little dollar and dime we spend, and let’s be honest, going into our personal finances isn’t exactly the most exciting thing to do.

Tips for your Financial Plan

• Financial planning is super important, but it can feel a bit overwhelming to handle by yourself. Looking for a financial advisor can actually be pretty straightforward. SmartAsset offers a free tool that connects you with up to three vetted financial advisors in your area. You can even have a free introductory call with your matches to see which one feels like the best fit for you.

• Before you chat with an advisor, it might be helpful to consider how you’d like to break down your investable assets. Check out this free asset allocation calculator to help you find the right balance that suits your risk tolerance.