What is Financial Planning?

June 24, 2015

financial planningIn order to accomplish your goals in life, it is important to know how to manage your finances properly.  That is the purpose of financial planning.  The most common goals include buying that first home, saving for college for your kids, and planning your retirement.  Estate planning attorneys, who have expertise in financial planning as well, are willing and able to assist you with your financial planning, by working with you and your financial professional, together.
Preparing for financial planning
Financial planning can be a fairly straightforward process.  The first step is to gather your financial information so that you can take a look at your current financial situation.  After you have decided on your life goals and priorities, the next step is to choose the proper financial strategies to accomplish your goals.  Once you have implemented your financial plan, you need to review it periodically to make sure necessary adjustments can be made.
What information do you need to bring to your attorney?
The most important information to bring to your financial planning attorney includes information regarding your family, your income and expenses, all current investments and assets, income tax returns and retirement information.  You should also bring any insurance policies and other estate planning documents you may have.
What will your financial plan include?
Typically, there are six areas of financial planning to be considered when you start creating your plan.  These areas include net worth, cash flow, insurance, education, retirement and taxes. Your net worth is simply your current assets minus liabilities. It is important to take into account how your assets and liabilities may change over time. Cash flow represents your current income and expenses, which will also change over time and will likely affect your retirement planning.
Review your insurance policies
Reviewing any existing insurance policies you may have is important.  Your financial professional can help you determine whether you have sufficient insurance to take care of your family should anything happen to you. Your attorney will assist you in determining whether the insurance will cover potential legal costs such as taxes and estate administration.  You may want to consider disability insurance and long term care coverage, as well.
Saving for College
If you have children, your financial planning should include the best method for saving for their college education, by determining how much you need to set aside and which financial vehicle is best for that purpose.
Retirement planning
Many financial professionals provide in depth retirement planning, as an entire area separate from financial planning. As part of your financial plan, however, you also need to estimate what your expenses will likely be once you retire.  That way, you can determine how to best fund those expenses once you stop working. It is crucial to also plan the most tax efficient ways to transfer assets to your family after your death, in order to avoid taxes, such as estate taxes and capital gains taxes as much as possible.
If you have questions regarding creating a financial plan, or any other financial planning needs, please contact Anderson, Dorn & Rader, Ltd., either online or by calling us at (775) 823-9455.

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