Identify and Prioritize Goals

The first step of the financial planning process is to identify and prioritize your future financial goals. To do a successful financial plan, you will need to understand where you currently stand in relation to your financial goals and how far or close you are in achieving your financial goals. You need to sit down and analyze your financial situation in details in order to accomplish this.

Once you have identified and prioritized their financial goals, you will be in a better position to use the financial planning process to create a financial plan tailored to your needs.

Most financial planning steps aim to explain and analyze the followings:

• Net Worth (Financial Position)
• Cash Flow (Financial Position)
• Asset Allocation (Investment Profile)
• Income Tax (only appears in the Detailed Report)
• Retirement Planning
• Stock Options (Financial Position)
• Education Funding
• Major Purchase Planning
• Protection Planning (Life Insurance and/or Disability Insurance and/or Long-Term-Care Insurance)
• Estate Planning

Some financial plans out there are more comprehensive than others. Most brokerage firms and financial institutions can develop a simple financial plan for you for free of charge. This basic financial plan will tell you when you can retire, how much investment you need to retire, etc. This simple financial plan is usually enough for most investors.

A more comprehensive financial plan costs somewhere around $1,000. Many investors who did comprehensive financial plan says that they are not very useful. Financial planning is not about having a comprehensive financial plan. You can do the financial planning yourself and it will be adequate.

One area of financial planning that is included in a comprehensive financial plan that is useful is the Probability Analysis. A probability analysis can be performed on your financial goals. The probability analysis provides an estimate of how likely your current and proposed strategies will achieve your financial goals based on certain assumptions. Within certain ranges, it takes into account volatility of financial markets, varying return rates, and even your life expectancy.