By Buying a yacht, planning a vacation, and buying a house are some things we spend our lives planning! It takes objectives, information, organization, and compromise to realize our plans. The success of any plan will also depend on a considerable degree of financial planning on the planner’s part. Developing a successful financial plan will likely be significantly enhanced if you follow the five-step process described below.
1. Defining and agreeing on your financial goals and objectives
You should develop a financial plan incorporating goals and objectives to guide your financial decisions. In addition to these features, they should include the following:
- Achievable and quantifiable
- Defining a timeframe and keeping it clear
- Don’t let your wishes override your needs
To assist you with measuring progress, your Elgon Financial Advisors should agree on and document them. Additionally, periodic reviews must ensure they remain relevant and capture changing circumstances.
2. Gathering financial and personal information
The quality and clarity of the information you provide to your Adviser will determine the success of the financial planning process. He will conduct a detailed financial fact-finding to capture your relevant information. Included in this are:
- Budgets and incomes
- Liabilities and assets
- Attitude, tolerance, and capacity for risk
3. Analyze your personal and financial information
In step 2, you provide your Adviser with information that reflects your current financial profile. To better understand your financial situation and pinpoint strengths and weaknesses, the following ratios are provided:
- Solvency Ratio
- Savings Ratio
- Liquidity Ratio
- Debt Service Ratio
Concerning investment assets, a psychometrically designed risk tolerance questionnaire assesses your attitude, tolerance, and capacity for risk. Additionally, this is analyzed to determine your asset allocation for retirement or investment.
4. Financial plan development and presentation
After receiving the information in the second step and completing the analysis in the third step, the financial plan is developed. Every goal and objective in step 1 should be addressed, and a recommendation provided. Included are:
- Balance sheet (net worth statement)
- Calculation of the annual consolidated tax
- A report on the annual cash flow (showing surpluses and deficits)
- The Adviser and the client sign the report after it is presented, explained, and discussed.
5. Review of the financial plan
The Adviser will outline the recommended courses of action after the analysis and development of the plan have been completed. Implementing these measures may include:
- Investing in a new pension or strategy
- Switching debt providers
- Life insurance or serious illness insurance
- Expenditures and income adjusted
As your coach, your Adviser will coordinate with you and other professionals, such as accountants and investment managers, to implement the recommendations. They may also handle interactions with financial product providers.
Continuous monitoring is an essential part of financial planning. It is important to periodically review the actions recommended in the plan to account for changes in income, asset values, and business or family circumstances.
Conclusion
Financial planning that is properly defined and documented has the best chance of being successful. However, there will be opportunities to pursue financial security and wealth, and it requires expertise, discipline, and proper analysis.
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