Buying a new home may be a good time to get your financial house in order. If you are like most people, your home and retirement savings may be the largest investments you will make in your lifetime. A financial plan can help you clearly articulate what you want your money and investments to achieve for you.
Creating a good financial plan is much easier than you might think. The toughest decision youíll need to make is the first one: to call a financial consultant and ask about the professional planning services available to you. Hereís what to expect.
1. An introductory meeting. This is an initial discussion where you can clearly spell out what your financial goals are. You can specifically discuss where you think your finances are in order and where you think they may need improving. Typical issues to discuss include: retirement, college planning, tax liability, disability or death, career change or business ventures, proper investing and estate planning.
2. A data gathering stage. This step is an inventory of what you own and what you owe. Gathering a few records such as bank, life insurance and brokerage statements, last yearís 1040, real estate, retirement accounts, and trusts, wills or other estate documents will make this step much easier.
3. Your plan presentation. Allow ample time for your financial consultant to analyze the data you provide and prepare a comprehensive plan. Typical highlights include: tax reduction, investment analysis, asset allocation, income growth and draw down, and estate planning. The complexity and depth of your plan will correspond with the variety of assets and liabilities shown in your data.
4. Implement suggested strategies. In addition to assessing your current situation, your financial plan will include recommendations for improvement. You might be able to change some things rather quickly (such as moving from taxable bonds to tax-free investments) while you may use others as longer term goals (such as rebalancing your portfolio or drafting estate planning documents). 5. Monitor and update your plan regularly. Most experts recommend you revisit your plan every 3 to 5 years or whenever you have a life-changing event. Tax law or career changes, children or grandchildren, or any time your family situation changes warrants reconsideration of your plan. You should update your financial consultant on what has occurred and your expectations near and long term. Together you can determine if your plan needs a tune-up or a complete overhaul.
It is important to work with a professional financial planner you know you can trust. Some important trusted designations to look for are: CFA (Certified Financial Analyst), CFP (Certified Financial Planner), CLU (Chartered Life Underwriter), ChFC (Chartered Financial Consultant) and PFS (Personal Financial Specialist). These are some of the major legitimate designations in financial advising that you are likely to come across.
Your financial plan provides security and peace of mind. You know the condition of your financial home from the foundation to the roof. Credit yourself for having the vision to make your money return all the rewards you want. Thatís the true benefit of creating your personal financial plan.