Financial Planning Fundamentals

By Ziyah Esbenshade, CFP®, APMA®, CRPC®

Financial planning can help you gain a better understanding of where you are at financially, how to prepare for challenges that may be ahead, and how to plan for where you want to go. If you do not have a financial plan prepared for you or your family, a financial advisor can help. Here are the typical steps of the planning process: 

 

Goal setting. In this foundational step, your financial goals take the spotlight. This is your opportunity to identify what you hope to achieve during your lifetime and when you’d like to get there. For example, you may want to own a home in three years and start a family in five years. Or you may want to return to school to pursue an advanced degree, which may incur short-term costs but help you earn more in the long-term. Or you may want to retire early and travel the world. In order to achieve any of these goals, you need to name them first.

 

Fact-finding. During this phase, you will gather numbers to see how things add up. Your financial advisor may ask questions to calculate your personal balance sheet, which estimates your net worth based on assets and liabilities. Your income, spending habits, monthly bills and outstanding debts all need to be laid on the table. The price of future goals needs to be quantified, so you can determine what you need to save to afford them. If your goals don’t match the reality of your financial circumstances, one or the other needs to change.

 

Plan creation. A comprehensive financial plan plots how to reach personal and professional goals within the context of actual income and expenses. With a clear line of sight into your financial status, you can look for opportunities to trim unnecessary expenses and redirect money toward your goals. Your financial advisor may also provide investment strategy, asset allocation, and portfolio recommendations based on your individual goals and personal risk tolerance to help optimize your finances. 

 

Strategy implementation. This is where things get real. If your plan requires you to save a certain amount of money each month, then it’s up to you to make it happen. If reaching your goals means you need to increase your income, now’s the time to put in the extra effort to get that promotion or switch fields to pursue increased compensation. Your financial advisor can help you select savings vehicles that are suited to your investment goals. 

 

Ongoing plan reviews. Ideally, your financial plan is a dynamic document that is adjusted periodically to reflect your life circumstances. Your financial advisor will recommend at least one annual meeting to check in on your progress toward your goals and fine-tune your financial plan. 

 

Financial planning takes work, but the process can be very rewarding. Larger goals become easier to attain when you can take small steps to reach them. It’s never too early or too late to put a financial plan in place. A financial advisor can help you create your plan and manage your investments to help you realize your life goals.  

 

 

Ziyah Esbenshade, CFP®, APMA®, CRPC®, is a Private Wealth Advisor and Senior Vice President with Pell Wealth Partners, private wealth advisory practice of Ameriprise Financial Services, LLC in Rye Brook, New York. She specializes in fee-based financial planning and asset management strategies and has been in practice for 20 years. To contact her, visit pellwealthpartners.com, call 914.253.8800 or visit our office at 800 Westchester Avenue, Suite 300, Rye Brook, New York 10573.