Eight Financial Planning Questions You Should Know
What is Personal Financial Planning?
Personal financial planning is guidance by a licensed financial professional on the financial decisions faced by individuals. It includes portfolio allocations, future planning decisions, goal setting, and exploration of different investment vehicles.
Why do I Need Personal Financial Planning?
To organize your finances in the most efficient manner to reduce taxes, maximize investment return, provide adequate risk management, save time and attain financial peace of mind.
But Can’t I Just Do It Myself?
Perhaps, but will you? Most business people and professionals are finding it increasingly difficult to plan adequately for their personal financial growth and security. Among the most common reasons for their frustrations are:
- Insufficient time
- Too great a number of investment possibilities
- The complexity of ever-changing tax laws
- The entwining of employee compensation and benefits
What is Generally Included in a Financial Plan?
The length of the plan is based on the complexity and details required for each individual’s circumstances. The typical plan can range from anywhere between 15 to 200 pages and includes:
- Cash Flow Analysis
- Capital Management (debt and investment portfolios)
- Liquidity Analysis (Estate and Retirement)
- Income Tax Projections and Planning
- Retirement Needs Analysis
- Insurance Needs (life, property, casualty and disability)
- Future Educational Funding Needs
- Employee Benefit Analysis (coordinate personal holdings)
- Closely-held Business Analysis
What is My Role in the Planning Process?
Your role in the planning process is to provide as clear and concise information to the planner as you can. They should clearly understand your goals, dreams, attitudes, and positions. Your planner may meet with you annually to update this information.
Are Any of the Financial Planning Fees Tax Deductible?
Typically yes. IRS Section 212 lays out the specifics as to what aspects of your investments and tax planning are deductible (and you planner should be able to assist in this).
How Can I Measure the Worth of Financial Planning?
Once the planner has assessed your situation and made recommendations, you should be able to compare the projections with the cost of the analysis. Your planner should have presented data that more than paid for the expense of the plan.
Will Personal Financial Planning Make Me Rich?
Unfortunately, there are no get-rich-quick schemes that really work. All the more reason for personal financial planning; it can help you keep more of what you earn and keep your savings working harder. It does this by:
- Increasing the productivity of assets
- Providing financial and emotional security for your family
- Better risk management
- Provides introduction to a broader spectrum of investment opportunities
- Increased income through tax planning
- Investment alternatives are provides closer inspection
- Minimizes the effect of disability, forced retirement, and death
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