: Financial Planning
To manage your money effectively, you will
need to have a financial plan. A financial plan is
a written statement of your financial goals and
your strategies for achieving them. This plan
includes:
• A summary of your current assets.
• A list of your primary goals and a timeframe for meeting them.
• An estimate of what you expect your
goals will cost .
• A list of the types of investments you
might make to help achieve those goals.
• A schedule for implementing those investments.
Note that Financial planning is an on-going
process. You will want to evaluate your progress on a regular basis, update your list of goals
or your timetable, and revise your strategies
as your goals or financial situation changes.
Defining Goals
You may have several different financial goals.
They can be immediate and simple in the short
or long term. The most helpful way to group
your goals is usually by the time you have to
meet them.
Short-Term Goals
Are those you hope to meet in the next year
or two. To invest for these goals, you want to
keep your money secure and liquid, so you will
have it available when you need it. You do not
want to risk money intended for your short
term goals on uncertain investments.
Mid-Term Goals
Are those you expect to achieve within ten
years. These goals may include buying a home,
starting a business, or paying for tuition. You
can afford to take some risks when you invest
for mid-term goals, especially if they are several years away. Due to time constraints, you
may want to sell the riskier investments and
put the money into a more secure account.
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Long-Term Goals
Are more than ten years in the future. For
most people, the primary long-term goal is
affording a comfortable retirement. Helping
your children or starting a business of your
own may also be in this category. As long as
you are investing for growth, then you can
usually afford to take more investment risks
to meet your long-term goals.
Seeking Advice
Many people seek professional advice in making and implementing a financial plan. One advantage of working with a professional is that
it gives you an added incentive to get started
and stay focused on your plan.
You can ask friends or family members who
are experienced investors for referrals to the
planning professionals they work with. You
may also discuss your planning needs with the
authorized person who handles your investment transactions.
