Frequently Asked Questions
Most frequent questions and answers
What is Financial Planning ?
Financial Planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a house, saving for your child’s higher education or planning for retirement. The Financial Planning Process consists of six steps that help you take a ‘big picture’ look at where you are currently. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals. The process involves gathering relevant financial information, setting life goals, examining your current financial status and coming up with a strategy or plan for how you can meet your goals given your current situation and future plans.
What are the Benefits of Financial Planning ?
Financial Planning provides direction and meaning to your financial decisions. It allows you to understand how each financial decision you make affects other areas of your finances. For example, buying a particular investment product might help you pay off your mortgage faster or it might delay your retirement significantly. By viewing each financial decision as part of the whole, you can consider its short and long-term effects on your life goals. You can also adapt more easily to life changes and feel more secure that your goals are on track.
What are the Common Mistakes in Financial Planning Approach by Investors ?
The following are some of the common mistakes made by investors in their approach towards Financial Planning
- Don’t set measurable goals.
- Make a financial decision without understanding its affect on other financial issues.
- Confuse Financial Planning with investing.
- Neglect to re-evaluate their Financial Plan periodically.
- Think that Financial Planning is only for the wealthy.
- Think that Financial Planning is for when they get older.
- Think that Financial Planning is the same as retirement planning.
- Wait until a money crisis to begin Financial Planning.
- Expect unrealistic returns on investments.
- Think that using a Financial Planner means losing control.
- Believe that Financial Planning is primarily tax planning.
Can you do your own Financial Planning?
Some personal finance websites, magazines or self-help books can help you do your own Financial Planning. However, you may decide to seek help from a professional Financial Planner if:
- You need expertise you don’t possess in certain areas of your finances. For example, a Planner can help you evaluate the level of risk in your investment portfolio or adjust your retirement plan due to changing family circumstances.
- You want to get a professional opinion about the Financial Plan you developed yourself.
you have an immediate need or unexpected life event such as a birth, inheritance or major illness.
- You feel that a professional Advisor could help you improve on how you are currently managing your finances.
- You know that you need to improve your current financial situation but don’t know where to start.
Who is a Financial Planner?
A Financial Planner is someone who uses the Financial Planning process to help you figure out how to meet your life goals. The Planner can take a ‘big picture’ view of your financial situation and make Financial Planning recommendations that are suitable for you. The Planner can look at all your needs including budgeting and saving, taxes, investments, insurance and retirement planning. Or, the Planner may work with you on a single financial issue but within the context of your overall situation. This big picture approach to your financial goals sets the Planner apart from other Financial Advisors, who may have been trained to focus on a particular area of your financial life.
Why Fee-Only Financial Planner ?
Fee-only financial planners are registered investment advisors with a fiduciary responsibility to act in their clients’ best interest. He/She is someone who charges a fee for financial plan creation and advisory and does not receive any kind of commissions/incentives from mutual fund houses, insurers or other financial product sellers. Financial advice is provided and clients are expected to take necessary action on their own.