What’s required: goals and the commitment to meet them.

Getting your goals down in black and white helps you focus on what’s really important to you. Nothing is too trivial or too fantastic, at least in the initial planning stages. And creating the list will probably help you clarify your priorities.

Defining financial plans

The term financial plan has more than one meaning. Informally, your financial plan is a list of the things you’d like to be able to afford in the future, and the steps you’ll take to obtain them.

A formal financial plan is a document prepared by a financial advisor that provides an analysis of your current financial situation, explains financial planning strategies, and identifies specific goals and the steps to take to reach them. You may pay a one-time fee for a formal plan, or it may be part of the advisory service you receive for an annual asset-based fee.

All financial plans — informal and formal — come to the same conclusion: The difference between just keeping your head above water and moving closer to realizing your financial goals is how much, how well, and how soon you invest, and how you protect what you already have.

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What if you don’t plan?

 If you sometimes think that the things you want out of life are so normal that they will happen in the regular course of events, you’re being lulled by a false sense of security. Most advisors agree that goals become realities only when you have invested enough to make them happen.

Ask yourself, for instance, if you’d have enough money for a down payment if your ideal house were for sale right now. Or whether you’d be able to pay a $30,000 tuition bill if your child had just been accepted to college. If your answer is yes, you can breathe more easily. But if it’s no, then this is the time to act.

To have money available when you need it, you have to develop a plan for making the kinds of investments that are most likely to produce what you’ll need. Identifying what those investments are, learning how to put money into them — and then doing it — is precisely what planning for the future is all about.

Competing for your dollars

In many cases, your goals will be competing with each other for your investment dollars. By planning ahead, you can develop strategies for resolving the conflicts without having to abandon your goals along the way.

For example, if you start a retirement savings plan when you begin your career, you can contribute part of every paycheck to your savings, year in and year out. Even if you miss a year or two, when you’re buying a house, or paying college tuition, for instance, the money you’ve already invested is available to grow.

Invest in yourself

To build a strong enough financial base you’ll need two things: money and time.

Sometimes, though, you may have financial opportunities, like buying a home or building up a business, before you have enough cash to afford the investment.

That’s why financial plans often include borrowing to meet your more immediate goals. You can think about paying off these loans as the equivalent of putting money into an investment account — except you’re already enjoying the benefits. And, at the same time, you should also be investing to meet future goals.

Financial planning worksheet

Typical goals  Potential choices
Short-Term Goals
Make specific investing decisions for the next few years
New car

Down payment on home

Extra education

Establishing a business

Treasury bills


Money-market funds

Short-term bonds

Balanced funds

Mid-Term Goals
Sketch the major expenses you visualize for the next ten year
Education for children

Larger home

Second home


High-rated bonds or bond funds

Stock in well-established companies

Stock mutual funds

Treasury notes

Zero-coupon bonds

Long-Term Goals
Commit a percentage of your income to tax-deferred investment
A comfortable retirement

Affording travel, hobbies

Security for long-term care

Helping children

Inheritance for heirs

Growth stocks

Real estate

Stock mutual funds

Long-term bonds

Zero-coupon bonds

The impact of time

Timing is an important part of financial planning. If you identify when you’ll need investment income, you can select investments designed to produce it at the right time.

You also have to keep track of when you make certain investments and when you sell them. For example, you must put money into an IRA by April 15 for it to qualify as a contribution for the previous year. Or, if you want to sell a stock that’s lost value and use the capital loss to offset capital gains, you must act by December 31.

Every year you should also revise and update your financial plan and the investment strategy you’re following. For one thing, you probably won’t have exactly the same goals today that you had a couple of years ago, or that you will have a couple of years from now.

What’s more, investments change in value, depending on what’s happening in the economy, within a certain industry, or with a particular mutual fund. You may want to adjust your plan to take advantage of those changes.

Work with your advisor in creating a financial plan

Financial planning is the cornerstone of successful investing. And you can get help developing your plan when you work with a financial advisor.

In looking for a person to work with, you’ll discover that some advisors do planning exclusively, and refer you to other experts when you’re ready to put your plan into action. Others incorporate planning into the services they provide, like handling your investment orders or preparing tax returns.

A range of goals

One part of financial planning is developing strategies to reach the goals that are most important to you — perhaps owning your own home, enjoying a secure retirement, or paying for a college education for your children or grandchildren. Since these are ambitions many women share, anticipating them puts you in good company. It means that as you begin the planning process, you can benefit from what others have learned about getting your priorities in order, balancing competing demands, and selecting the right places to put your money to work.

Another reason you plan is to be prepared for events that may happen unexpectedly. Some of these possibilities are exciting, such as the opportunity to go into business for yourself or the pleasure of hosting your child’s wedding. But you will have to identify the resources to pay for them.

Other surprises, such as a suddenly widowed parent or a serious car accident, may threaten financial hardship. If you’ve established a sound plan, you’re more likely to survive these challenges without incurring long-term debt.

Another reason you plan is to be prepared for events that may happen unexpectedly. Some of these possibilities are exciting, such as the opportunity to go into business for yourself or the pleasure of hosting your child’s wedding. But you will have to identify the resources to pay for them.

Other surprises, such as a suddenly widowed parent or a serious car accident, may threaten financial hardship. If you’ve established a sound plan, you’re more likely to survive these challenges without incurring long-term debt.

A formal plan

A professionally prepared financial plan is sometimes a formal document that describes your current financial situation and goals and provides an overview of investing strategies. It also proposes several different types of investments, as well as insurance, tax planning, and other financial advice. If a planner suggests a formal plan, ask to see a typical one, so you’ll have a clear sense of what you’ll be paying for.

Advocates claim that a formal plan will tell you where you stand, focus your investment strategies, and help keep you on track.

Take a closer look

If you’re concerned that you’ll have to abandon some of your financial goals because they’ll cost you more than you can afford, think again. You may have to make certain changes in the way you spend money now. You may have to postpone some of your less time-sensitive objectives to meet those that are more time specific. You may even decide to sacrifice something you’ve been excited about to achieve an objective that seems more urgent. But before you can make any of those decisions, you’ll have to know what your financial situation is right now.

If you’re serious about meeting your goals, begin by looking at your cash flow. Cash flow is the relationship between the money that’s coming in, such as your earnings, and the money you’re spending. The bottom line is that if you’re paying all the bills that are due on time and regularly have money left in your account — even if it’s only a little — your cash flow is positive. But if you’re always short of money and have to borrow from your savings to pay your bills, your cash flow is negative. That has to change, either by earning more or spending less, or both.

A less formal plan

Advocates of less formal financial plans maintain that you don’t need a costly, multipage document to summarize personal information you provided in the first place, or to describe investment opportunities that are regularly discussed in the media and on financial websites. Instead, they suggest you ask your financial advisor to write a follow-up memo, or report, of your initial meeting, outlining your assets, goals, and willingness to take risk. That memo can serve as the foundation for building an investment strategy.

Customized plans

One of the major advantages of working with a financial advisor to develop an investment plan is having it custom-fitted to your needs and goals. The more experience your advisor has working with women clients, the more precisely he or she can tailor a plan to suit you.

Woman-centered plans are important for several reasons. For one, you have a longer life expectancy. This means you’ll have to emphasize growth investments that will enable you to live comfortably for 20, 30, or more years after retirement. You’ll also have to plan for more years of healthcare expenses, as the older you get, the greater the probability that those costs will increase.

A plan that worked

In 1944, when Anne Scheiber retired from the IRS, she’d saved $5,000. But when she died in 1995, at age 101, she left an estate worth more than $22 million to Yeshiva University. Scholarships in her name ensure that many young women can afford the educations they seek.

How did someone whose top annual salary was $4,000 build such an impressive fortune? She had a strategy: invest in stocks you believe will grow in value, reinvest your dividends, and be patient. And she worked at it diligently. Of course, a buy and hold strategy doesn’t guarantee a strong return. But Ms. Scheiber’s success can be the inspiration you need to get started.

A buyer’s market

As an investor, you’re the one who decides which plan to adopt and which investments to make. But that control comes with responsibility for making the wisest choices.

  1. As you invest: Ask for an evaluation of the costs of each investment, including what you would pay if you changed your mind or wanted to sell it in the future. The advisor will know the answer, or can find it for you. If it’s a mutual fund, you can check the prospectus.
  2. Do some comparison shopping before you make your decision about annuities, insurance policies, bonds, and other investments where the cost depends in part on the seller’s commission. That will tell you if the price you’re being quoted is competitive.
  3. Don’t act quickly on recommendations. Most of the investments that you’ll be considering change price slowly, so you can take time to think it through, or ask for more information. But don’t procrastinate either. The sooner you invest, the more time your principal has to compound.

How To Build Financial Plan? Checklist by Inna Rosputnia

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