BY JUSTUS MORGAN
Guest Columnist | Posted: Wednesday, July 1, 2009 12:00 am
Now that school is out and the weather is finally starting to feel like summer, it's time for the annual ritual of a family vacation. In the financial planning community, there's a common saying that people spend more time planning their next vacation than they do the next 10 years of their life. Perhaps by making the comparison between planning your next road trip and the five steps of the financial planning process, you'll have greater clarity for making progress toward your personal and financial goals.
Step one: Choose a destination
Before any preparations can begin, you have to figure out where you would like to go. It's the same with financial planning because your personal and financial goals dictate the desired outcomes. Once there is clarity around your destination and goals, you can begin gathering relevant information. In financial planning this may include a list of your financial assets, insurance policies, estate documents and tax returns.
Step two: Sort through brochures
Once you have received all your travel brochures, you will need to sort through them and prioritize which activities or destinations you want to see or do. The financial planning process uses a similar approach to explore the assumptions and the strengths and weaknesses in your financial situation.
Step three: Identify alternatives
Often a family vacation involves the input of different people including the parents, children and perhaps even other families that are traveling together. Having multiple options available is usually helpful in case there are differences in opinion or travel plans need to change because of weather or other unforeseeable circumstances. When preparing your financial plan, it is also wise to take into account other courses of action that may achieve the same goals.
Step four: Hit the road!
The previous planning is now about to pay off as you embark on your vacation. The implementation step is choosing the most appropriate tactics to achieve your goals and committing to the process of taking action. Whether you handle the implementation or delegate it to a trusted advisor, this step should feel effortless if all the planning has been done correctly.
Step five: Be ready for detours
As we all know, even the most thorough plans don't account for every possible thing that could happen. As the trip progresses, changes will be made.
It's the same with your financial plan. It's unreasonable to assume a plan created five years ago will still be relevant today, just as road atlases change with time too. However, starting with a plan based on your goals will help make the inevitable changes more manageable. As John Lennon said, "Life is what happens to you while you're busy making other plans."
Justus Morgan is a certified financial planner with Financial Service Group, a registered investment advisory firm at 4812 Northwestern Ave. On the Web at http://www.toyourwealth.com.