Who needs a financial plan? The short answer is everyone. Even if you have limited resources, a plan can be a critical tool toward achieving your long-term financial goals.
At its simplest, a financial plan is a document that presents your long-term financial goals and maps out the investment strategies to achieve them. According to the 2013 Household Financial Planning Survey, there is a positive relationship between the degree of planning and financial preparedness. People who engage in financial planning were more confident in their ability to make financial decisions and were more pleased with their progress in meeting their savings goals.
Defining Your Goals
Perhaps the most important task in any financial plan is determining the goals that will drive your investing strategy. Income needs in retirement will likely be paramount, but other possibilities may include buying a vacation home, financing your children’s college education or maintaining a particular lifestyle in retirement. Your Financial Advisor can help you define and quantify these and other goals.
Mapping a Strategy
Based on your goals, time frame and risk appetite, your Financial Advisor will develop a plan with savings, asset allocation and investment recommendations. Among the questions you will likely answer in preparation are whether you are an aggressive or risk-averse investor, or if your immediate need is for growth or income.
In addition to mapping out an investment strategy, a financial plan also considers the full spectrum of your financial needs, including insurance, estate planning and debt situation. Any of these elements can have a bearing on your investing strategy, as well as your ability to meet your long-term goals.
Finally, a financial plan is an organic document. It changes with you as you grow older and your priorities shift. Marriage, children and career changes all impact your goals and your financial situation. That’s why it is recommended that you revisit your plan at least once a year. A well-thought-out plan can help you define and articulate your goals, and provide the framework for achieving them. So get started today.
If you'd like to learn more, please contact your Financial Advisor.
Article by Wealth Management Systems Inc. and provided courtesy of Morgan Stanley.
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