Financial Planning

Financial planning involves setting personal and financial goals and then formulating a plan to reach them.  If you are thinking about retirement, the first thing to do would be to take some time and figure out what your short-term and long term goals are.  Short-term goals might include paying off credit card debt or hospital bills, while long-term goals will probably involve having enough money for the future.  Taking stock of your current assets is important, because this will let you know what you have to work with financially and will help you determine what you need to do to reach you financial goals.  There are many financial planning services available, most of whom offer free workbooks that will get you started on the right path to a positive financial future.

When creating a financial plan, the first thing to ask yourself is where you want to be when you retire.  This is the most important question to think about because it will influence everything you do with your money.  For instance, many people simply want to own their own home and have enough income on hand to cover expenses when they stop working.  Their financial plan is going to be much less aggressive than someone who wants to own their own business, send their children to college and retire with a vacation home.  While it might be wise for the more conservative person to cut back on spending, invest in safe money market accounts and make some home improvements, the person who wants a lot more for retirement will have to work harder at expanding their base of income and diversifying their investments to include higher risk stocks.

The next thing to think about is where you are with regards to time.  This will have the biggest impact on what you do with your money.  If you are twenty-five, you have some time to figure things out.  You can change jobs, change cities, start a business, close a business and be free with your money as long as you don’t incur any major debt.  By the time you are thirty, however, you will need a plan.  This is the time to start putting away money for the future.  Even by opening a savings or money market account, you should be able to set aside something every month.  If you add up the amount of money you will have saved plus interest by the time you are fifty or sixty, you will get an idea of where you will be when you retire.  If this isn’t enough money, you need to come up with a more aggressive plan for your career and your investments.  Now is also the time to set aside any extra money that you have and invest in the stock market.  Over the short-term, this investment is riskier, but will yield results above inflation in the long-run and will make your financial position stronger in the future.

When you reach your fifties, it is really time to take inventory of what you have and what it will cost to retire.  At this point, a realistic strategy will have to be followed in order for you to retire comfortably.  Hopefully, by this time, you have accumulated some assets.  You may have some savings, some home equity, a 401k plan and some stocks.  If you have little bits and pieces of investments like this sitting around, it is definitely time to combine them into something a little more structured.  This could mean selling a business or real estate, investing differently, and generally thinking about managing money instead of working for it.  Consulting a financial planner to help you do this is wise; because they will be able to help you grow what money you have as much as possible, in order for you to enjoy a comfortable retirement.

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