Financial planning is much more than just buying life insurance, or an annuity and calling it a day. Many people have a false perception of what financial planning really entails accompanied by a false sense of fear.
Financial planning is not just a singular action, the concept is a process to follow, much like a diet plan. If you wanted to lose weight, or live a more active lifestyle, would you just start by making random purchases of products you think can help? Most likely, you would not. One of the best examples I can think of to help explain the reality of financial planning is a weight management program, such as Weight Watchers or Jenny Craig. If you have ever been a part of these programs, then you know that they are more involved but generally lead to great results. When you join a program like these, you simply do not just try to eat better, workout more, and hope for the best.
When you are creating a financial plan, you follow a similar format to that of a weight management program, acknowledging that both plans are to make your life better from now on so you can live longer and enjoy life!
| Financial Planning | Weight Management | |
| Step 1: Find your starting point | Where do you currently stand financially? What assets and investments do you have? | What are your measurements: weight, diet habits, exercise frequency, etc. |
| Step 2: Establish your goals | What are your short, intermediate, and long term financial goals? | What are your goals: lose weight? Build muscle? Eat healthier? |
| Step 3: Determine your path | How far away is your goal from your current standing? Is it manageable in your time frames? Are you expecting to be a millionaire within the week? | How far off from your goals do you currently stand? Are you setting reasonable goals for your time frames? |
| Step 4: Develop a plan | Establish a plan on how to achieve your goals. What actions will generate results | Establish a plan on how to achieve your goals. What actions will generate results |
| Step 5: Implement your plan | If it’s opening a savings account, spending less on groceries, etc. here is where you put your plan to work | Whether it is exercising more frequently, cooking more homemade meals, etc., this is where you put your plan into action. |
| Step 6: Consistent review of progress | This is one of the biggest parts of financial planning—this is not a one-time process. It is important to measure your progress consistently—especially as the market and economy changes so rapidly. | It is vitally important that you check in on your measurements to see if you are making progress. |
| Step 7: Adjustments made, if needed | If after reviewing your progress, you find that you need to make adjustments to keep moving forward on your path, they should be made and continued to be monitored | If you find that you are not happy with your progress, perhaps adjustments should be made to help you stay on path towards your goals. |
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