This will be my last article after two years as a guest columnist for The State newspaper. I hope you have learned a lot about various areas of financial planning.
As I have stated, the objectives of financial planning can vary widely from investments, retirement, income tax, estate planning, insurance, education planning and more.
While it means different things to different people, the Financial Planning Association defines it as “the long-term process of wisely managing your finances to achieve your goals and dreams, while at the same time negotiating the financial barriers that arise in life.” It urges people to remember “financial planning is a process, not a product.”
Financial planning is examining one’s assets, liabilities, income and expenses and evaluating and gathering data to develop, monitor and change a plan as needed to reach one’s goals. It is an allocation of resources to meet your objectives. People spend an inordinate amount of time satisfying needs, but proper planning allows them to more easily attain their wants as well.
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Regardless of one’s wealth, there are only so many dollars that can be allocated towards those want, and financial planning develops a strategy to prioritize the use of those finite resources.
Fortunately for the public, financial planning is becoming a more popular household phrase given the many commercials ranging from the “green line” to “what is your number?”
A harrowing statistic that I discuss while speaking on financial planning is that 57 percent of people over the age of 55 have less than $50,000 saved for retirement. Unfortunately, only about 40 percent of the public has ever done any sort of financial planning to determine how to reach their goals.
People also have a tendency to simply wander and thus miss seeing the benefit of financial planning unless short-term goals are added to the long-term path. For example, if a couple’s goal is to retire at age 65 with $1 million dollars saved, that is admirable, but how do they measure their progress along the way? They should not simply wait until age 65 to see if they made it. Instead, knowing where they want to be at age 65 should help them determine the approximate milestones for ages 45 and 55 as well. Even when people plan for these intervals, life can always throw a curve ball in the form of job loss, divorce or disability.
However, taking the time to plan and examine the goal path brings clarity and manageability to the journey. Through financial planning, you establish your goals and destination. Without a destination, any path will get you there.
My goal has been to answer your questions and provide knowledge for you in your own financial planning. I hope I have achieved this goal and that you enjoyed it. If you want to continue this journey, please follow me at www.uscneil.com. Learn more about my co-columnist, Ashleigh Brooker, at www.ajbrooker.com.
Life is a journey; plan for it.