Financial Planning can be complicated process and a daunting task for many people. It’s only natural to want to seek professional help from a financial planner or a financial advisor. But what is it that a financial planner will do for you? What can you expect? Or more precisely, what do financial planners do?
What Do Financial Planners Do
While financial planners may come from different backgrounds and belief systems, most financial planners adhere to a formal financial planning process as they work with their clients. This financial planning process may look like this:
- Gather your financial data.
- Help you set your financial goals and your life goals.
- Analyze and check your financial situation.
- Help you to develop action items for improving your financial situation.
- Help you take action and carry out your action items.
- Monitor your financial plan.
Collect and Organize Your Financial Information
In order to create a good financial plan, you need good data and inputs. Many financial planners will help you collect and organize the information needed to develop your financial plan and the resources available to fund your financial plan. Following is a list of helpful documents in the financial planning process:
- tax returns,
- investment account statements,
- retirement account statements,
- insurance policies,
- college fund statements,
- employee-benefit statements,
- social security estimates,
- liability statements.
Set Your Financial Goals and Your Life Goals
A financial planner will help you think through what financial goals are important to you,help you decide how much you need to have for your financial goals, and then work with you to set a date for achieving your financial goals. They may also address the various life goals you want to meet.
Analyze Your Financial Situation
After establishing your goals, a financial planner will most likely look at your assets, review your liabilities, revisit your cash flow, assess your insurance coverage, check your investments and analyze your tax strategies. Some financial planners will create a net worth statement and analyze your spending habits. They will also consider specific life goals and events for which you need to be ready such as marriage, birth, career change, retirement, or death.
Create Your Financial Plan Action Items
Once the analysis is complete, your financial planner will help you brainstorm to develop some specific actions you should take to address both your financial goals and life goals. You will also discuss a plan of action.
Implement Your Financial Plan Action Items
After you have your list created, it’s time to put it in action. Some financial planners will help you with implementation of your action plan
Monitor Your Financial Plan
The last step in the financial planning process can be considered one of the most important steps. As you begin to move forward by checking off your action items, your financial planner will help you to check progress toward your goals. At the least, you should review your situation with your financial planner periodically (at least once per year) to adjust your actions as your life changes.