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Financial planning means a lot of different things to different people. A simple analogy of financial
planning is to look at the way you and your family plan a vacation. Imagine getting into your car to go on a vacation without any idea of what you wanted to do or where you wanted to go. After a lot of driving, you would eventually end up somewhere; but would it be where you really wanted to go? It's the same way with planning for the future. If you don't plan well you are certain to end up somewhere; but will it be where you want/need to be?
Our goal is to simplify and facilitate this process for our clients to ensure they are not distracted by the many issues that will arise. We have summarized this process into the following steps:
Step 1 - Document Your Goals
We realize that this is a daunting task for many of us, mostly because there are so many different tools and methodologies available to us. Unfortunately, however, many of these are too complicated to use so most people just don't do it. The flip side is that, if done properly, it should include all that you might dream of:
a financially secure retirement
funding your children/grandchildren's education (or even your own)
a second career
a vacation home (or two)
doing charity or volunteer work full-time
a financial legacy for your family, your alma mater, or a favorite charity
starting a business
pursuing a full-time hobby
traveling throughout the world
An ideal model would also mathematically determine what investment rates of return and savings you will need throughout your life in order to accomplish all of these goals. This would essentially be the floor for your investment performance. Click here to learn more about this process and how we have created a proven way to get this model done with the most accuracy.
Step 2 - Assess Your Personal Risk Tolerance
Once you have completed a financial model, as described in Step 1 above, and have hopefully determined the required rate of return, you have a decision to make: do I invest to a rate of return equal to, greater than or less than that required rate. Of course nobody wants to leave money on the table by under-investing but very few advisors (or clients themselves) properly screen themselves to determine what the rate of return of a portfolio would be based on the volatility that a client can handle. Let's face it, if the portfolio moves up and down to an uncomfortable level, you will exit and never achieve its long-term rate of return. Completing a properly worded risk tolerance questionnaire will help you determine what volatility level is appropriate for you.
Step 3 - Select Suitable Investments
This is not as simple as everybody thinks. If done properly, it should take into consideration the results of your model (in Step 1) AND should never result in an investment portfolio that has the volatility that might exceed your own personal risk tolerance (Step 2). Click here for the detailed steps of properly choosing suitable invesments for your personalized situation. Remember, virtually no two people have the same risk tolerance and personal financial situation.
Step 4 - Look into Additional Estate Planning Issues
Invariably, as people define their goals in Step 1, other areas of concern start to be recognized. These areas normally include estate planning and the analysis/acquisition of various types of insurance. There are many concepts that can come from insurance and estate planning that can have a severe impact on the results from the steps above. Unlike working directly with an insurance broker or attorney, our experience has proven that working with GCD as the quarterback severly helps to eliminate a lot of the negative issues that might otherwise be a barrier.
Step 5 - Constantly Monitor Your Financial Situation
There are many occurrences that can go on in the financial aspects of your life. Children getting older, college, weddings, job loss, deaths, disability, retirement and many other things. It is virtually impossible to predict all of these items at the onset of the creation of a good financial plan. Therefore, working with an advisor that understands the impact of these issues, is organized and task-oriented enough to bring this issues to the surface and the ability to alter the plan accordingly, if needed, is essential to the well being of the plan.
We provide all of these services through the assemblance of a Wealth Management Team that we have assembled over the years. This is a unique, proven approach that helps our clients to make good, unified decisions.