Everyone chooses to handle their money differently. Some people are staunch savers or investors, while others are more than happy to drop a few extra dollars here or there for an expensive latte.
Solving everyone’s unique financial challenges with cookie-cutter financial planning services is impossible. Since people lead different lives and use money differently, the best thing to do is create a unique financial plan catered to one individual’s life.
Financial planning is the iterative process of creating a financial plan and then actively monitoring and updating it as circumstances in your life change, whether related to your career and income, family and health, or lifestyle choices and your retirement plans.g it as circumstances in your life.
Let’s review several essential features to include in a comprehensive financial plan. If you work with a financial planner, you can expect your plan to cover these financial planning areas, among others.
A financial planner can provide oversight and accountability to ensure you are spending the right amount given your income and that you aren’t going into debt throughout your financial life.
A good financial plan should include an emergency fund to cover 3 to 6 months of expenses. For example, if you lose your job without severance and expect you can return to work within six months, your emergency fund combined with your unemployment income should help you bridge the gap between jobs.
A financial plan will determine which debt you should pay off first and how quickly to repay it. Suppose the interest rate is fixed and relatively low. In that case, a financial planner may suggest not paying off certain debts more quickly, especially if this frees up your dollars for savings or investments, which may offer higher returns.