When you plan, you identify financial goals and develop strategies to meet them.
When you do
financial planning, you're looking toward the future, specifically at building the kind of security you'd like to have and being able to afford the lifestyle you want. But to plan successfully, you also have to evaluate the present, including the financial choices you're making now. Otherwise it's too easy to find yourself making random decisions that won't move you toward your goals effectively, or that may even interfere with achieving them.
It's never too soon, or too late, to begin financial planning. Financial planning is important, whether you've just started working or are thinking seriously about retirement. And it should be a continuing process, so that you can evaluate your progress, revise your goals, and update your strategies on a regular schedule.
Without planning, you run certain financial risks. You may not have enough in reserve to meet expenses you're expecting, like the down payment on a home or the price of a college education. You may have to revise your retirement plans. Or you might leave your family without enough to live comfortably if something happens to you.
PLANNING STRATEGIES
In financial planning terms, creating a strategy means defining the steps you'll take to accumulate the money you need to pay for the things you want.
To begin, you need a clear sense of what your goals are, what they will cost, and how much progress you've already made toward achieving them. For example, you will have to evaluate the performance of the assets you already have. And you probably will have to find ways to increase the amount you're investing and select how you will invest it.
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