Save, invest, and keep debt to a minimum: You likely already know these pillars of personal financial management. But do you have a complete financial plan?
A financial plan does more than just help you pay the bills. It’s a comprehensive road map designed to help you achieve your short- and long-term goals. Get started creating your financial plan by following these key steps.
#1 Find a Trusted Financial Planner
Sure, some people have the knowledge and determination to execute their financial plan, but DIY approaches aren’t for everyone. Most people find extreme value in working with a certified financial planner (CFP) who has a level of knowledge and experience you wouldn’t have access to on your own.
Beyond bringing the financial know-how, a financial planner has another vital role in your financial planning. They become an unbiased source of guidance, helping you stay steady and aligned with your plan amidst market volatility and significant life changes.
#2 Understand Your Current Financial Situation
Knowing where you are is critical to understanding where you want to go. Before you identify your goals and objectives, take stock of different areas of your life, including your health, relationships, lifestyle, investments, tax standing, and any other factors that impact your finances. Additionally, make sure to gather and organize all of your financial documents.
During this phase of the process, your advisor will also gather a complete picture of your financial circumstances by asking various quantitative and qualitative questions about your income, spending, values, priorities, objectives, attitudes toward risk, and more.
#3 Determine Your Financial Goals
Using the information from the previous step, your financial advisor will work with you to identify realistic financial goals for the short, medium, and long term.
Short-term goals usually take one to three years to accomplish. They may include lowering debt, building an emergency fund, or creating a budget.
Medium-term goals are the bridge between your short- and long-term goals. These often include major financial milestones like saving up for a house.
Long-term goals take time to achieve, typically more than ten years. For many, the most significant long-term goal is to build up a sufficient retirement nest egg.
Whatever your goals, they serve as your guiding light as you develop and implement your financial plan.
#4 Develop the Plan
Here, your advisor will analyze whether your current financial course of action is moving you toward your goals. If it’s not, they’ll recommend alternative pathways and strategies to help get you there.
Those pathways usually include a personalized investment strategy, which your advisor will construct according to several factors, including your time horizon, cash flow, and risk tolerance.
#5 Review and Implement
Once your advisor has developed your financial plan, you’ll sit down and review it together. Your advisor should walk you through the thought process behind each recommendation, so you can make well-informed decisions about which options make the most sense for you.
After you’ve put your personalized financial plan together, it’s time to put it into practice. This might include implementing your new investment strategy, adjusting your expenditure, or coordinating with other financial specialists.
Whatever actions you need to take, stay disciplined in executing your financial planning recommendations. Following through on their plan is where people fail and, as a result, struggle to create the financial future they envisioned.
#6 Develop, Monitor, and Adjust
Your financial plan should never be set in stone. Major life changes, like marriage or a career change, can have a big impact on your financial situation and goals. To help ensure your financial game plan is always aligned with your goals and financial standing, meet regularly with your financial advisor to review, fine-tune, and adjust where necessary.
Get Started Creating Your Financial Plan
We’re relationship-driven here at Ironwood Wealth Management, meaning we take the time to truly understand your financial situation. Then, we deliver the steps and strategies you need to achieve your goals. Contact us today to learn more about our comprehensive financial planning services.
