True financial planning is a tool for control of your financial future and is a major component of your overall wealth creation plan.
Unfortunately the term "financial planning" has become the disguise used by salesmen trying to push commission based financial products like insurance and mutual funds.
So make sure you understand that a financial plan should not be confused with a financial product as it is often used by some so called "financial planners".
It can be described as a tool that allows us to define our financial goals, asses our current financial situation and allows us to plan what we need to do to achieve those goals. As such, it then becomes a document (yes, a financial plan must be written) that is tailored to YOU, where you are, what you want in life and how your finances are going to help you achieve that.
Keys to Financial Planning
If by this point you are beginning to better understand the importance of financial planning then it might help you to see some of the advantages of putting one together:
On the other hand financial independence means that you no longer depend on a source of income (a job) for your financial security. Instead you have created multiple sources of income, have accumulated assets and possibly own a business all of which contribute to you not depending on someone else for your income - you have achieved wealth. Whether you retire or not is up to you. If this is a goal of yours then your financial plan must reflect it.
Whether you are a single individual who might have a loved one that would be vulnerable if you passed away, or if you are a parent that would like to protect his spouse and/or children in case something were to happen to you. By assessing the risks that you are faced with and possible consequences as part of your financial plan you will be able to make decisions regarding life, health, disability, home, car insurance and more. Also consider wills, trusts, power of attorneys, property titles and more. With the help of an accountant and lawyer you can incorporate these into your financial plan.
Hopefully these keys to financial planning will let you see the importance of financial planning regardless of your financial situation. If you are single and starting out, a recently married couple or a family of four, there is a financial plan for you.
Remember that even a simple and basic financial plan is better than no plan. If you sit down and consider your own circumstances you will see you don’t need a complicated strategic plan to benefit from personal financial planning.
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I really like what you explain in this article and agree with what you are saying. The issue is how to go about implementing some of these ideas. My wife …