An Overview of Financial Planning

Financial planning is a continuous process that relies on a cohesive plan to support your current and future financial needs. It can reduce stress about money and help you achieve your long-term goals, such as financial security in retirement. A financial plan allows you to maximize your assets and enable you to weather any financial setbacks along the way.

Specifically, financial planning revolves around managing your finances and preparing for all potential expenditures and issues that may arise. It involves identifying your goals, evaluating your current financial situation, and then developing a plan with relevant recommendations for implementation.

A financial plan is a tool that tracks your progress — it is not a static document, as you will likely need to adjust it as your life evolves. It helps to reevaluate your financial goals as you hit major life milestones, such as starting a new job, getting married, having a child, or losing a loved one. Financial planning also makes you feel more confident about navigating road bumps such as unprecedented inflation or recession.

Once you have addressed your basic needs and short-term goals, a financial plan can guide you in tackling big-picture, long-term goals. For example, careful estate planning and wise investing can help you build generational wealth that passes down to loved ones or preferred charitable causes.

Furthermore, a written financial plan gives you tangible and measurable goals. And because progress can be tracked, you can reduce uncertainty or doubt about your decisions or make adjustments along the way to overcome obstacles that might derail your goals. According to a 2021 Modern Wealth Survey by Charles Schwab, 65 percent of Americans feel financially stable with a written financial plan.

However, financial planning is not synonymous with asset management. Generally, asset management refers to managing your investments, including choosing the bonds, stocks, mutual funds, and other types of investments you make. Nevertheless, financial planning can still help with your investment portfolio by mapping out which types of assets you can invest in as part of your broader financial plan and by how much.

You can usually still get advice from the same asset management professionals for your financial planning, as they both fall under the financial advisor category. But, when looking for a financial planner, look for one with relevant certifications focused on financial planning, such as a Certified Financial Planner (CFP).

Often, you can make the financial plan yourself or seek professional assistance from a financial planner or advisor. However, working with a professional can give you peace of mind and confidence that your financial future is better managed and secure.

The services offered by a financial planner may vary based on your individual needs or situation. Financial planners offer services such as investment advice, debt management, budgeting, education financing, retirement and estate planning, insurance, and tax planning services.

When it comes to tax matters, a financial planner can help with tax return preparation, maximizing tax deductions through capital tax gains, and retirement tax planning. An individual could receive a composite of these services for holistic financial planning.