Financial Planning 101
The rules of money have changed
If you handle your money the way your grandparents did, you could be in trouble.
That's because life is so different today
Longer life expectancies mean you run the risk of not having enough money to retire comfortably, and being unable to care for aging parents or leave a legacy for your children. People relocate more often, change jobs more often, have children and grandchildren later in life, and even marry more often. The rules of money have definitely changed. There’s more of a need than ever now for an all-encompassing financial plan to ensure a secure future for you and your family.
And you can start your financial planning process by doing certain things yourself.
Create a financial plan
- Set targets for yourself
- Come up with practical strategies and timelines to accomplish these goals
- Review your financial plan sporadically to make any adjustments to it (based on changes in your financial position, or life events such as a birth or a death in the family, job change, a change in marital status, retirement, etc.)
Take control of your finances
- Bank statements
- Investment accounts
- Insurance policies
- Tax returns
- Estate documents
Assess your net worth
A positive net worth is always a good sign. Calculating your net worth means gauging the difference between your assets (bank balance, investments, house, etc.) and your liabilities (loans, mortgage, credit card debts, etc.). In an ideal scenario, you should own more than you should owe.
Craft a spending plan for yourself and your family
Figuring out where you need to cut down on expenses is another important step in this process. Once you have a clear picture of the inflows and outflows of your money, you can create an expense plan so that you can cut back on careless spending and save enough.
Ensure that you have a retirement plan in place
Your age doesn’t matter when it comes to planning for retirement. It is never too early or too late to start! Be mindful of the uncertainty of Social Security and the fact that very few companies offer comprehensive pension plans—you don’t want to end up struggling with your finances when you’re old.
Debt, set, go!
There’s good debt and there’s bad debt – and you definitely want to steer clear of the latter. Investing in property (like taking a housing loan) is an acceptable form of debt, since the interest rates are usually low and the appreciation of the value of the asset is always good. But beware of those crazy shopping sprees where you use your credit card and end up paying for your purchases at a whopping 24% rate of interest.
Once those things fall in place, you’re almost all set. But there’s one last thing that remains to be done!
Get adequate INSURANCE
Being one of the focal components of your overall financial plan, insurance is integral to you and your family to effectively cover any future risks. If you’re underprepared on this front, it can be devastating to you and your family.
That's why you need expert advice.
Edelman Financial Services is one of the largest independent financial planning firms in the nation, managing more than $6 billion for more than 15,000 individuals and families nationwide. Twice named the #1 independent financial advisor in the nation by Barron´s*, Ric Edelman and his team have delivered financial planning and investment management services to thousands of consumers for nearly 25 years.
Read these helpful articles to find out how we can help you plan for a secure financial future.
Are You on Target to Retire?
Do You Need A Financial Advisor
- The 4 Obstacles To Building Wealth
- The 11 Reasons You Need To Plan
- Confused About How Financial Planning Works
How To Choose A Financial Advisor
- 10 Questions To Ask When Evaluating Financial Advisors
- Do You Really Know The True Cost of Your Advisor?
*According to Barron’s, "The formula [used] to rank advisors has three major components: assets managed, revenue produced and quality of the advisor’s practice. Investment returns are not a component of the rankings because an advisor’s returns are dictated largely by each client’s risk tolerance. The quality-of-practice component includes an evaluation of each advisor’s regulatory record." The rankings are based on the universe of applications submitted to Barron’s. The selection process begins with a nomination and application provided to Barron’s. Principals of Edelman Financial Services LLC self-nominated the firm and submitted quantitative and qualitative information to Barron’s as requested. Barron’s reviewed and considered this information which resulted in the rankings on Aug. 27, 2012/Aug. 28, 2010/Aug. 31, 2009.
Ric Edelman is Chairman and CEO of Edelman Financial Services, a Registered Investment Adviser, and CEO, President and a Director of The Edelman Financial Group. He is an Investment Adviser Representative who offers advisory services through EFS and a Registered Principal of (and offers securities through) Sanders Morris Harris Inc., an affiliated broker/dealer, member FINRA/SIPC.
EFS offers advisory services in all 50 states and Puerto Rico. As such, these services are strictly intended for individuals residing in the United States. No offers may be made or accepted from any resident outside the specific states referenced.