Have you ever sought professional advice in handling your financial affairs? Most likely, you would have received a financial plan from your banker or financial advisor.
You may have noticed that this financial plan covers pages and pages of charts and graphs summarizing your position, goals, risks and time horizon—along with proposals and ideas to plan for your future. You may also have asked yourself: does it have to be so complicated?
The answer is ‘no’. A financial plan can be likened to an entrepreneur taking a step back to study his roadmap ahead. You (the entrepreneur and owner of your future) map out your goals, perform some vital self-interrogation on how to get there, and study the challenges and risks involved.
You may not realize this but oftentimes; it’s not external factors hindering you from achieving your financial goals; but internal obstacles. You need to know yourself first and foremost—and that is a fundamental aspect of financial planning many forget. Putting ‘technique’ before ‘purpose’, and ‘tasks’ before ‘heart’—it’s kind of like putting the cart before the horse. Not very wise!
5 Big Questions To Ask Yourself In Financial Planning
A financial plan is based on 5 main questions. These questions can be worked out on one page (yes, only one page for starters!) and a willing financial advisor would be more than happy to assist you with this exercise. A more thorough workout of your needs and objectives can be fleshed out once you have a better understanding of yourself by answering these big questions.
You have saved some money or are planning to do so on a regular basis. Put these figures down and draw out a timeline. What will you do with these savings and how does your attitude to risk influence the possible returns? Be realistic so you will not make investment decisions based on emotions.
Does your projection meet your needs or do you have to make room for some changes? In the timeline, add bullet points to illustrate when you need certain funds and how much you need for each milestone.
The Real Deal in Financial Planning: It’s Not Always Straightforward!
Lastly, you can leave behind an inheritance for your next generation and should factor that into your financial plans. Bear in mind that the plan mapped out in your mind may be a steady progression towards your goals—however the actual financial path you take in life would more or less look like the sketch below:
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