Sasha Jacob — Top 3 Financial Planning FAQs Answered

At some point in our lives, we will need to assess our financial circumstances. It may be because you just started working, you’ve received a great amount of money, you’re about to apply for a loan, etc. No matter what the reason is, there will definitely come a time when you need to ask yourself, “Where am I financially?”

When you realize you’re in bad financial shape, chances are you’re going to get things in order or seek professional help. This is where financial planning comes in. Before anything else, you need to understand that financial planning is a process, not a product. It is considered a long-term method in which you strategically manage your finances to achieve specific goals. At the same time, you would also need to adjust some parts of it if other issues arise.

Sasha Jacob, an experienced corporate financial advisor and CEO of Jacob Capital Management Inc., says in order to create a sound financial plan, a good understanding must first be developed. In doing so, you can either learn from reading related books or articles or by simply working with an advisor. Of course, each has its own pros and cons. You must choose whichever works best for you.

Sasha Jacob answers top three of financial planning FAQs

1. What are the signs that I need a financial planner?

a. You’re almost retiring or already retired.

You need to know if you are financially prepared for retirement. Additionally, you need to know how and when you should file for social security as well as the best strategy for withdrawing from my various retirement accounts.

Being able to address all these factors is crucial before you start the planning. Each retiree is different, in terms of their current financial circumstances and strategies used to cope with a retired life.

You can always take advantage of the free consultation offered by financial advisory firms. From books to newspapers to blogs, learn from as many sources as you could.

b.You’re planning on starting a family.

Tying the knot and having children is a major step for any individual. Before marrying, it is highly recommended to go through your prenuptial agreement. This is a written agreement made by a couple before they marry concerning the ownership of their respective assets should the marriage fail.

From joining your finances as a married couple to managing the cost of having children to life insurance to mortgages to real estate planning, there are certainly plenty of things to set in order.

Work with a planner who could help you navigate and prioritize all of these responsibilities, so you would know where to go.

c. You have a high income.

As a person who earns a lot, saving becomes easy. You may know the proper ways to save but not sure which goals should be prioritized.

A good advisor will not only help you make better decisions and recommend tax-savings strategies. He should also be capable of taking over some of the implementation and management responsibilities so you can focus on making money while enjoying your life.

d. You are self-employed.

Some self-employed individuals face different financial dilemmas. But the options are not limited. To date, there are plenty of different retirement accounts to choose from, more variable income, employees to take care of, and questions about ownership and business structure.

Sasha Jacob suggests working with a financial advisor who specializes in working with the self-employed individuals. They have an in-depth understanding of these problems and the planning opportunities available. With a good advisor, you can get the best out of your business.

e. You have a very specific need.

In dealing with certain situations, you need a person with specialized knowledge.One good example is handling a large amount of student loan. It may require a strong understanding of the various repayment options, which can sometimes get confusing. Another example is having a child with special needs requiring a much different set of financial planning strategies.

It is important to find a financial planner who completely understands your situation and has a specialized knowledge to provide suitable options.

2. What are the benefits of hiring a professional financial planner?

a. A better income management.

With the help of a financial planner, it’s possible to manage your income more effectively. By doing so, you’ll understand how much money should be allocated for tax payments, other monthly expenditures, and savings.

b. Family’s financial security.

In creating and going through the entire financial planning process, you need to make sure it is inclusive of your family. Having a proper insurance coverage and policies in place is essential in case of emergency.

c. An increase in cash flow.

Good financial planning helps you to carefully monitor your spending. This makes it possible for you to save more money. Tax planning, prudent spending, and careful budgeting increase your cash flow.

d. A great capital base for future investments.

With increased cash flow comes an increase in capital. With this, you can consider investing in prospering industries. Not only does this improve your financial security, but also opens up doors to more opportunities.

e. Investment.

A good financial plan isn’t only limited to stabilizing your finances but also aims to improve it. In laying out your plan, you need to put your personal circumstances, objectives, and risk tolerance into the picture. Your plan should act as a guide in helping you choose the right types of investments to fit your needs and goals.

f. To gain a better financial understanding.

You can’t venture into something you know nothing about. The same principle also applies to financial planning. Needless to say, a good understanding goes a long way. With it, the task of setting measurable financial goals becomes easier.

g. Standard of living.

The savings you built due to good planning will surely serve its purpose. At some point in your life, that sum of money can prove beneficial in difficult times. You can start by making sure there is enough insurance coverage to replace any lost income. You just never know when your family breadwinner loses his job.

h. Profitable assets.

A cushion in the form of assets is more favorable than in the form of money. However, you also need to understand that most assets come with liabilities attached. It is very important to determine the real value of an asset.

Your financial planner should also remind you that settling or canceling the liabilities comes with the understanding of your finances. It involves the overall process which helps build assets so they don’t become a burden in the future.

i. You can expect an ongoing advice.

Working with a financial planner greatly pays off especially when you’ve already established a genuine relationship. A good financial advisor is committed to helping you achieve your goals. Your financial advisor should also be there to assist you at all occasions, addressing whatever worries you.

Establishing a genuine yet professional relationship with a financial advisor you can trust is critical to achieving your goals. Your financial advisor will meet with you to assess your current financial circumstances and develop a comprehensive plan customized for you.

3. How do I start with financial planning?

a. Let go of the nerves.

Before anything else, you need to let go of everything that has been bothering you. It is important to feel confident about your choices.

It doesn’t matter if you haven’t chosen the best possible funds within your retirement, wound up paying for a credit score that you could’ve gotten for free, or don’t get the minimum rate on your debt. What matters is you have prepared your finances, despite not getting the best deals.

Sasha Jacob agrees getting the best choice does make a difference. This is if you’re looking to maximize your savings or returns. But if getting the best means waiting for a long period of time and going through an awfully costly process, then it may not be worth it.

b. Start from scratch and from what you already have.

Naturally, you first need to know where you stand before creating a plan. During this stage, your financial planner should carefully assess your current financial circumstances. Here, all aspects of your finances would be laid out through a financial inventory.

Whether you’re doing things alone or with a planner, you need to consider the following areas. Your credit score, debt loan, account balances, assets, and net worth. Often, this is done with the help of a tracking software for maximum accuracy.

c. Know where you want your plan should lead you.

Think of it as though you’re navigating a map. When everything has been laid out, simply identify where you are and where you want to be. If you’re not sure how to get there, don’t worry. The first period of your financial plan is about knowing which route works best for you. Until then, it’s completely okay to encounter some bumps along the way.

Make a clear list of your goals along with their specific timeframes. Also, make sure you list them according to their weight. In other words, your priorities should always come first.

d. Creating the route.

The reason why you’re determined with creating a plan is that you want to get out of your current situation. When creating your route, start by identifying the most important factors. Your origin is your financial inventory, your destination is your goals, and your budget is your route map.

When building a budget, make sure it works for you. Not only should it provide for your needs but it should also help you build your savings. In creating a budget, you need to list down how much you’re making in a month, how much you’re spending, and how much you plan on saving.

Commitment is essential here. Committing to reducing your expenses while allocating some money for your savings would determine if you’re making progress.

e. Getting started with the planning.

After you’ve taken your inventory, created a budget, and set a financial goal, you should have a clear idea of how much money you have left to conquer what’s up ahead. The real challenging part is knowing where to begin.

Will you start by paying off your debts? Should you focus on your retirement account? Is it better to start building your emergency fund?

The confusion takes place when you have plenty of goals and simply don’t have any idea which is more valuable than the rest. What’s worse is when you simply don’t have enough resources to fund them all. At this point, anxiety is probably kicking in. But don’t worry. The best financial advisor can always help you in setting your priorities.

f. Categorizing your goals.

Commonly, financial goals fall into four unique categories. These are;

• Debt payoff
• Emergency savings
• Short-term savings
• Long-term savings

Ideally, it is highly-recommended to fund these goals in addition to your budget. You just have to choose which one should be designated with a larger percentage of your income. In other words, your bigger priority.

Unfortunately, that’s not always possible, considering some income restrictions.

Sasha Jacob suggests beginning with the emergency savings and debt payoff. Establish a cushion of at least $1,000 so you can simply divide that money between your emergency savings contributions and debt payoff. If you think you can sneak at least $50 for your retirement fund every month, that would also be ideal, especially if you only have low-interest debts.

With regards to your short-term goals, it can be considered somewhat a necessity especially if you’re not tied to family obligations yet. If you’re a young professional, chances are you have plenty of goals. These include traveling, buying a house, creating a family, etc. These will need some funding that’s not tied up to any of your financial priorities.

Finding yourself stretched thin while attempting to fund all of these categories, it’s likely a sign that you need an additional source of income. If you simply don’t have enough time, consider some ways you can save money and cut back on your day-to-day expenses.

However, a good earning potential would still go a long way. The flexibility that comes with an increased cash flow is unlimited. Sasha Jacob suggests finding as many ways to boost your income. Why not have a garage sale or move to a cheaper home? There are plenty of ways you can simultaneously fund all your saving categories without straining your finances. All you need to do is look for those opportunities.

If you have any financial questions, feel free to visit Sasha Jacob on LinkedIn, follow him on Twitter and check him on G+.