You will recall that Financial Planning is the process of meeting the goals of your life through the proper management of your financial resources. A Financial Planner will generally follow the following six important steps:
1. Identifying your present situation.
Essentially this step summarizes where you are today. You will appreciate that your current situation is a result of the cumulative effects of all your decisions and actions of the past.
2. Identifying your financial and personal goals.
This is a very crucial step. The financial planner will help you identify your financial and personal goals and objectives with time frame. Examples of such goals may include providing for children’s education, insurance for life as well as health, buying a house, marriage of children and retirement.
3. Identifying financial problems that can create barriers.
Once the goals are listed, the financial planner will identify financial problems that later on can create barriers to achieving financial goals. Examples may be high inflation, inadequate increase in income etc.
4. Providing written recommendations and alternative solutions.
Based on the goals as well as the likely problems, the financial planner will arrive at the recommendations and give the same in the form of a plan with alternatives, wherever possible.
5. Facilitating the action.
A financial plan is only helpful if the recommendations are put into action. While the action is yours, a Financial Planner will facilitate your action by clarification as well as reminding your action points.
6. Periodic review and revision of the plan.
In a dynamic situation, there may be changes in the general economic conditions as well as your economic condition. Hence the Financial Planner will review and revise your financial plan, if necessary.
These are general steps but may vary based on your conditions and the approach of your Financial Planner. A good Financial Planner virtually becomes a doctor for your wealth!
