Financial Planning

Think of financial planning as a road map, a way to get from where you are today to where you want to be at some point in the future. You most certainly have your own specific goals, such as:

	A comfortable retirement
	College education for your children
	Creating or maintaining an estate you want to pass on to your family
	Starting a business
	Building a dream house

Personal financial planning helps you reach your goals through the development and proper management of your financial resources. Financial planning is a process to accomplish the goals you have established.

The Financial Planning Process
Isn't Financial Planning Just For The Wealthy?
How Important Is Financial Planning?
Do You Really Need Financial Planning?
How Will You Benefit From Financial Planning?
Is Financial Planning A One-Time Effort?
Does Financial Planning Always Involve A Big Plan?
Can You Do Your Own Financial Planning?
Start planning and stop worrying!
Easy-to-use calculators

The Financial Planning Process

Financial planning is a process - a process where you stop working for every dollar and learn to start putting your money to work for you. The first step is to gather and analyze data about your income and expenses, taxes, insurance coverage, retirement plans, wills, trusts, investments, and other information that is pertinent to your overall financial situation. The next step is to set realistic goals, identify key financial issues concerning those goals, and implement specific strategies for achieving your goals. These strategies may include building an emergency fund, establishing a spending and savings plan, beginning or adjusting an investment program, purchasing disability or long-term care insurance, drafting a will, establishing a trust or developing a business succession plan. The last step in the financial planning process is to periodically review and, if necessary, revise your plan.

The financial planning process is not a "one-size-fits-all" package. It is a set of goals and strategies tailored to meet your specific values, abilities, and needs.

Isn't Financial Planning Just For The Wealthy?

Financial planning isn't about "getting wealthy" - it's about helping you achieve your goals, whatever your level of affluence. Anyone who wants to take control of their financial life, make good financial decisions, and achieve financial independence can use financial planning.

Financial planning is not just for the wealthy.

How Important Is Financial Planning?

Years ago, the financial life of the average family was relatively uncomplicated. People worked for the same company most of their lives, lived a few years in retirement on Social Security and their pension, and passed their modest estate on to their children. However, increased longevity, changing demographics, and a more complex, dynamic financial world have changed all that.

Consider these tough financial facts:

Many of today's retirees will live 30 years or more in retirement - requiring far more financial resources to maintain their desired lifestyle.

Social Security and company pensions may no longer provide the majority of your retirement income.

Tax laws change almost annually

Downsizing companies no longer provide "cradle-to-the-grave" benefits or job security. The average American changes jobs seven times in a lifetime, and millions are self-employed. This demands new approaches towards savings, retirement, taxes, and estate planning.

With couples having children later in life, many couples are "sandwiched" between paying for college and helping their elderly parents, while also trying to save for their own retirement.

For many Americans, financial planning is not a luxury - it is a necessity.

Do You Really Need Financial Planning?

	Do you feel you make good money yet have little to show for it?
	Are you confused about the vast array of investment options?
	Are you unclear about how your current investments are performing?
	Are you concerned that your current investments don't fit together in a well defined portfolio that's likely to achieve your goals?
	Are you uncertain if you have the right kinds and amounts of insurance coverage?
	Do you and your spouse differ over how to handle your money?
	Are you uncertain if you need an estate plan? (If you need one and don't have one, the state has one for you, but you may not like it.)
	Do you feel you pay to much in taxes?
	Are you worried about not having enough money on which to retire?

If you answered yes to any of the above questions, you will benefit from financial planning.

How Will You Benefit From Financial Planning?

Financial planning will give you a clear picture, perhaps for the first time, of where you stand financially. Many families have no idea of the value of their estate, how they spend their money, or what their money can do for them.

Financial planning will provide direction and discipline. Without this direction and discipline it is very probable you will make impulsive, random decisions; you might buy this insurance, invest in that hot investment, adopt the latest tax strategy. The pieces not only don't fit together, they may actually conflict with each other and compound the problem. Financial planning integrates your assets with your goals and objectives.

Financial planning can give you peace of mind. Uncertainty about finances creates anxiety. Money is the most common cause of marital stress and divorce. If you know where you stand financially, where you are going, and how you're going to get there, you'll feel more confident about your financial situation, about yourself and about your relationships.

Is Financial Planning A One-Time Effort?

Financial planning is a lifetime process. Once the plan is in place, it needs to be periodically reviewed and updated to meet changing circumstances. Financial situations and needs change over the years as children are born, people die, marry, or divorce, inheritances are received. Investment performance must also be reviewed in light of the economy as a whole, the performance of your portfolio, and your changing needs. New tax laws may necessitate revamping part of your estate plan or income tax strategies.

Does Financial Planning Always Involve A Big Plan?

No. A financial planning professional can help you with any aspect of your financial planning needs. For example, if you want advice on how to roll over a qualified retirement plan into an IRA or what investments to make for funding a college education, a professional planner can address those specific needs.

What makes financial planning so effective is that it takes a systematic, holistic approach to whatever needs you may have. It recognizes that each financial element of your life - investments, insurance, taxes, and so on - are interlinked.

Can You Do Your Own Financial Planning?

If you have the time and knowledge and your financial situation is not too complicated, you may be able to do much of what needs to be done yourself. However, some aspects of financial planning are too complex for most people, such as calculating how long your retirement capital will last or maximizing tax strategies. You should seriously consider hiring a professional if:

	You have little or no financial experience
	You don't like numbers
	You don't have the inclination
	You don't have the time - usually the biggest obstacle for "do-it-yourselfers"
	You want an objective, outside perspective

Procrastination is the greatest enemy of financial independence, and using a professional planner will keep you on track. A professional planner will coordinate all your financial needs.

Start planning and stop worrying!

In a recent Gallup poll, 60% of those surveyed said they worried about their financial future.

There are a few simple steps you can take to help reduce your worries:

Put aside some amount regularly in savings or other investments. The compounding of earnings can be substantial. The longer your investment period, the greater the beneficial effect of compounding.

Invest in what you know. The better informed you are, the better your investment decisions will be. If you don't want to learn about investments, consider hiring us as your money manager and paying us to do your investing for you.

Diversify your investments. Have some of your money in an investment that is easily converted to cash in case of emergencies. The old adage "don't put all your eggs in one basket" is good advice when it comes to your investments.

Prepare an annual balance sheet (a list of all your assets minus all your debts) to determine your net worth. A comparison of your annual balance sheets will reveal your success at growing your retirement funds.

Plan where you want to be financially by retirement age. The calculators listed below will help you determine your savings requirements. Once you know how much you need to save, put your plan into action. Over 90% of Americans must rely on the government or others for assistance during retirement. With proper planning and diligence, you can be among those who can retire in comfort.

Don't use credit to purchase consumption items. Wait until you can pay cash for things which decrease in value. Borrowing money to purchase a home is usually a sound idea. Using credit to purchase household furnishings is not.

Pay off your credit card balance every month. Your credit card should be for the convenience of purchasing, not a source of permanent finance. The interest rates are much too high.

Monitor your investments to maximize your after-tax return. Use the calculator below to compare the long-term results of different interest rates. The difference that a 2% greater return can make in the growth of your investments is dramatic.

Do at least an annual review of your insurance needs to determine that you are neither under- nor over-insured. Be sure to contact your agent when you buy or sell any property.

The Magic of Compounding!

If you could have one of the following as your pay for thirty days' work, which would you choose? (A) $10,000, or (B) a penny the first day, two cents the second day, four cents the third day, eight cents the fourth day, and so on, with each day doubling on out to thirty days.

The $10,000 sounds very attractive, but the fact is that the penny doubled each day for thirty days adds up to over five million dollars. Of course, that is 100% interest compounded daily, a rate not available to most of us working folk. Nevertheless, this example shows you the power of compounding on your investment earnings.

Handy Calculators

Here are some easy-to-use calculators

Do you know how much you need to set aside to fund a college education for your child?

How much must you save each month for your retirement?

What will your Individual Retirement Account (IRA) be worth when you get ready to start drawing on it?

You can get rough answers to these and other questions very quickly by using the following calculators and making a few estimates on your part. Any computations you arrive at with these sources should be considered rough estimates. If you are looking for numbers you can rely on, please call us for assistance.

	Education Funding Calculator
	Retirement Calculator
	Retirement - How much to save and how long will it last?
	How much house can you afford?
	Mortgage Payment Calculator
	Benefits of increasing your mortgage payments.
	Prepaying your mortgage vs. investing.
	The actual interest rate on a mortgage.
	Simple Savings Calculator
	Simple Loan Payment Calculator
	Prepaying a loan, paying off credit card balances, etc.
	The payment needed for different loan amounts or different interest rates.

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	Steve Personett Certified Financial Planner Sentra Securities Corporation	Steve Personett Certified Public Accountant Steve Personett P.C.
	(520) 881-5437 2980 E. Fort Lowell Road Tucson, AZ 85716-1518 e-mail: personett@stevecpa.com