You are in control
You are already your own financial planner. Regardless of
the extent of help you receive from professionals, you
ultimately are the decision maker and you are responsible
for your own finances. Although the financial world has
become increasingly complex, it is becoming easier today to
do a lot of your own planning. The variety of resources has
expanded such as software for money management and
planning; online tools for banking, financial planning and
investing, and resources, and books and blogs that are easy
to understand. These resources may be good news for you if
the cost of professional fee only financial planners is
out-of-reach to you. Besides the cost of fees, others may
avoid planners because they have heard stories of advisors
trying to sell a product that didn't fit their situation.
Cost savings and avoiding product pitches are excellent
benefits of being your own planner.
Everyone should take a more active role in their financial
affairs. Not only does it help with educated decision
making and fraud avoidance it also helps you better
communicate with your other professional advisors such as
your accountant and attorney. You will also find yourself
spotting opportunities when they cross your path.
Becoming a better manager of your family's finances will
also help you 'dig out' if you are struggling financially.
When you consider the low savings rates and the high
household debt, many more people find themselves in this
category today.
The following are 7 steps to do-it-yourself financial
planning:
Step 1: Commit
The first step to financial planning always begins with
commitment. Whether you are having financial difficulty, or
have just avoided setting goals and mapping out a plan -
commitment is the first step. Commitment provides the
discipline and focus needed to help sustain you on the path
towards your goals.
Step 2: Set Goals
Without specific goals and a plan to achieve them financial
success stays a foggy dream. Therefore the second step is
to list the dreams that will motivate you. Write down all
of the goals you want to achieve in the short and long
term. This will serve as the driver, or the fire in the
engine giving you the motivation to move forward. Everyone
has dreams, but without constant watering and attention
dreams will go dormant. Leave your past mistakes and
inaction behind you, light a new fire and chart a course
forward. You have an enormous amount of potential and
talent, and if you have made mistakes you now have more
experience and wisdom. Dare to imagine what you could
achieve - because your best years are ahead of you.
Step 3: Assemble and Organize Information
Get your stuff together. Planning is easier if you
assemble everything in one central location. Make an
organized filing system either in a cabinet, accordion
file, a box, any way that works for you. Now locate and
file all of your tax returns, receipts, insurance policies,
contracts, wills, mortgages, deeds, titles, pay stubs,
employee benefit statements, banking (loan, savings and
checking), bills, investment and retirement plan statements
and any other important papers.
Step 4: Manage Cash Flow
Your household is a business. You need to know how much you
are earning and spending each month. Balance your checkbook
and establish a budget. There are dozens of books and
software to help with this, and your bank's website may
provide this as well. This will help you know when and
where you are overspending.
Step 5: Self Educate
Establish a sound foundational knowledge base about
financial matters. Start with books about budgeting and
money savings tips, debt, basic insurance and investing. Be
sure to include reading about mutual funds and financial
planning. Avoid get-rich-quick, real estate, gold or
innovative 'secrets' books. Stick to the fundamentals. I
find the "For Dummies, 'For Idiots' and 'D-Mystified' book
series to be very helpful for many people. Lastly, stay
informed about current financial topics by reading
financial magazines, newspapers, the business section of
papers, and blogs.
Step 6: Create a Written Plan
A written plan serves as a road map towards your financial
destination. It helps you understand where you are
presently and the steps that you need to take to move
forward. A financial plan is a process. As your life
changes with income changes or the birth of a child, your
plan should be updated to reflect your new circumstances.
You should revisit your financial plan at least once a year
to make any updates or to include items in your checklist
for completion. If you write your own financial plan, you
will have to obtain financial planning software. Your
other options are to pay to have a written financial plan
completed by a fee financial planner or by an institution
or professional that provides products. Be sure to find
out about how the planner is compensated and what your fees
will be.
Step 7: Engage Professionals
Most people can't entirely do all of their financial
planning by themselves. Assemble a team of trusted
professional advisors that you can rely on to help you
implement different aspects of your plan, answer your
questions and be on the lookout for you. The professionals
that can be the most advantageous are a proactive tax
accountant and financial advisor with extensive planning,
investment and insurance knowledge, an attorney qualified
in estate planning, and a banker that can help with credit
ratings and debt management. Before committing to anyone,
get referrals for trusted professionals from people whose
opinion you respect and don't be afraid to ask challenging
questions.
There you have it, the seven keys to do-it-yourself
financial planning. Start the process today: the sooner you
do, the closer you will be achieving your goals and living
with less financial stress.
----------------------------------------------------
Kent E. Irwin, ChFC, CLU, CAP, co-founder and CEO of
eFinplan.com. eFinPLAN is the first and only web-based
comprehensive consumer financial planning software designed
for people who are trying to do a lot of their own
financial planning. Find out more about how do-your-self
financial planning and how to reach your goals at: =>
http://www.efinplan.com/
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