What is Financial Planning & how does it work?
What is Financial Planning and how does it follow a six step process to put you in control of your personal finances?
On Day 1 of Financial Planning Week 2016, I explain.
Hello and welcome to Cranleigh in the Surrey Hills on the first day of Financial Planning Week 2016.
Financial Planning Week is an annual campaign designed to help build awareness of Financial Planning and help people improve their financial fitness.
But what is Financial Planning and how does it work in practice?
Financial Planning is an ongoing process to help you make sensible decisions about money that can help you achieve your goals in life. It’s not just about buying financial products like a pension or an ISA.
Financial Planning uses a six step process to make this happen.
Step one is to establish your goals in life — what are your short, medium and long term goals? What do you want to achieve in life?
Financial Planning starts here before putting in place the financial resources you need to satisfy your chosen life goals.
The second step is to work out what assets and liabilities you have. Assets are the things we own, liabilities are the things we owe. The difference between our assets and liabilities is our net worth.
Take a few moments to write down all of your assets and all of your liabilities.
Step three is to evaluate your current financial position. This is about understanding how close you are to achieving your goals.
The fourth step is to develop your financial plan. You need to create a “route map” for achieving your different goals. Where are you today, where do you want to get to, and how will you get there.
Step number five is the Implementation of your financial plan. Once you have a plan, you need to make some changes to your finances and turn the plan into reality.
The sixth and final step in Financial Planning is to monitor and review your plan at least once a year. This is important because you need to make adjustments to your plan and keep it on track.
And remember, when it comes to your money, the more you know, the faster it can grow.