Financial planning is the progression of meeting your life goals through the proper management of your finances. Life goals can encompass buying a home, saving for your children’s’ education or planning for retirement.
The financial planning process consists of six steps that can help you understand your financial situation. Utilizing these steps, you should consider where you are now, what you may need in the future and what you must do to reach your goals.
The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan on how you can meet your goals given your current situation and future plans.
Financial planning provides direction and meaning to your financial decisions. It allows you to understand how each financial decision you make affects other areas of your finances. For example, buying a particular investment product might help you pay off your mortgage faster or delay your retirement significantly. By viewing each financial decision as part of a whole, you can consider its short and long-term effects on your life goals. You can also adapt to life changes easier and feel more secure that your goals are on track.
Some personal finance software packages, magazines or self-help books can help you do your own financial planning. However, you may decide to seek help from a professional financial planner if: