Broker Check

What is Financial Planning?

August 11, 2015

Making the right choice for your future

The financial industry seems to have its own special language; you might even think we have our own secret handshake, too! Let us help you demystify the process and get you on track to reaching your goals!

I’ve run into a lot of confusion recently about what financial planning is. A common misconception is “financial planning is only for the wealthy,” followed closely by “financial planning is for when you’re older.” The people who generally benefit the most from planning are definitely not wealthy. Plus, the younger you start planning the better.

Many confuse financial planning with investing. Another mistake is to wait until a money crisis to begin. I guess better late than never, but one of the objectives of financial planning is to plan ahead for possible problems, such as an untimely death, the loss of a job, or a health problem.

Some think working with a planner means losing control. The opposite is generally true. The process should educate and involve you more, but that can probably be better explained by focusing on what financial planning is.

Almost everyone does some financial planning. It’s the process of setting goals and creating a game plan to accomplish them. So, if you’ve saved up to buy something, you’ve created a mini plan!

According to the Financial Planning Association, “Financial planning is the long-term process of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life.”

When the smoke and mirrors are taken away, financial planning is creating a roadmap to get from where you are now to where you want to be. And summertime is often a great time to either start or take an annual look at your plan and see if you need to make any adjustments.

If that’s all it is, what’s the big deal? Well, formal financial planning is a bit more complicated. It’s important to remember it’s a process, NOT a product. There are the 6 basic steps:

First, establish goals. I am surprised so many people don’t have financial goals. Yes, you’re busy living your life, often on overload. But if you don’t know where you want to go, isn’t it time to stop driving until you figure it out?

Everyone should have some short-term (accomplish in a year or less), intermediate (1-5 years), and long-term (will take longer than 5 years) objectives.

Next, gather financial information, so you know what you have to work with. This is everything from your tax return, pay stubs, all of your accounts: checking, savings, retirement, and investments. Don’t forget your debts: credit card statements, mortgage info, and all other loans. Insurance policies as well as your wills and other estate planning documents are essential to review.

Third, analyze and evaluate all of this information. This is researching and reviewing the building blocks of your future you pulled together.

Now, time to actually develop the plan to accomplish your goals. Occasionally this involves determining what additional steps are required. It might be additional job training or education, reduce impulse spending, paying extra on your mortgage, additional payments on credit cards or even to defer some future plans in order to achieve others.

Step 5 is implementation. This is what many confuse with financial planning. Yes, the process can involve investments. But recommendations are quite far down the list in our process.

Last, monitor and make necessary adjustments in your financial roadmap over time. Your goals and your resources will change, sometimes even to the point of re-starting the entire six step process.

Can you do your own financial planning? Of course! As soon as we are given an allowance or get a baby sitting or lawn mowing job, we begin our personal trek through the financial jungle. We decide what resources we have and what we want to do with our money.

You may decide to seek professional help if: 1) you need expertise you don’t posses in certain areas; 2) you want to get a professional second opinion about the plan you developed; 3) you don’t have the time to do the job yourself; 4) you have an immediate need or unexpected event such as an inheritance, major illnesses, or a birth; 5) your plan has gotten too complex and you’re having trouble integrating investment, debt, tax, and estate planning; or 6) you don’t know where to start.

If you’d like more information, the Financial Planning Association has excellent information designed for the public at

Isn’t it time to quit driving in circles? Don’t put off starting on your own mapped out personal financial journey. Remember, you’re in the driver’s seat!

- This article first appeared in the Wyoming Tribune Eagle, Monday June 22 2009. All rights reserved to Sandy Patrick. -