Preparing for financial planning is like planning for a long vacation. You make your lists, pack everything perfectly and finally after some time you are ready to start your journey. Except that you forgot a few key items. Now you need to go back and make more room in your suitcase. Arghh! What a pain to go back and reconfigure everything so it fits. But without your favorite diving mask, the trip just wouldn’t be the same.
In financial planning, forgetting or neglecting that one key item could significantly affect your projected financial results. So we don’t want to leave any data behind! Getting the pertinent financial documents in order isn’t something the average person does on a regular basis, so it may be hard to know what to bring to the table. After all, planning for a vacation is probably more fun than preparing for financial planning.
Why is this Important?
Numerous government and independent studies indicate that most people are not prepared for the simplest of financial emergencies or for their retirement. A couple studies include:
You don’t need to end up on the bad end of these statistics. You can seek out professional advice at a reasonable cost. Preparing for that first meeting with a Financial Planner can be overwhelming. I aim to break that down into a few logical steps. You may also view the full data gathering process, questionnaires, and checklists at Financial Planning Process page.
Here are 6 things you can do in preparing for financial planning.
Gather the Appropriate Financial Documents
It’s nice to know ahead of time what documents to bring to the table. The financial documents required may vary based on how extensive your financial planning will be, but a robust checklist will help you understand ahead of time what is required. You may question why some documents are required. For example, employer benefit documents are generally necessary. Why? Because your employer may be offering benefits that should be optimized and included in your Financial Plan. Detailed insurance declaration statements are necessary to determine if you are adequately covered.
Fill Out a Detailed Financial Questionnaire
The documents gathered above are broad Plan Summary Documents (SPDs), declaration statements, etc. with a broad amount of information. Additionally, there are financial statements that show account balances and other specific financial information. Those numbers need to be captured somewhere, either in an online form or financial planning software or both. Having these numbers summarized will help you and your Advisor understand your current financial situation including assets and liabilities. This could be termed your personal Balance Sheet.
Establish your Monthly Cash Flow
This may seem unimportant to many people and even some Financial Planners, but understanding what is coming in each month will help identify any problem areas that may affect your cash flow and credit report. It is also important from an investing standpoint because positive cash flow can be directed into investment accounts that are geared to meeting your medium and long-term goals. With the time-value-of-money working in your favor, even an extra $100 per month toward your investment plan can be a big difference maker over the long-term.
Create your Personalized Financial Dashboard
Once you have all your financial numbers determined, it is very convenient to have them entered into a financial planning software “financial dashboard” so that your accounts get updated regularly. The general functionality of such a financial dashboard includes:
- Manage your monthly cash flow
- See your checking and savings account balances
- Check on your overall debt level
- View your investment account balances
Not all Financial Planners provide the functionality of such a software tool, but it is definitely nice to have as a client so you can check your overall financial well being on a regular basis from the comfort of your own home. It also serves as a discussion point for your quarterly or yearly review with your Financial Planner.
Determine your Risk Tolerance
Your personalized Risk Tolerance profile is important to determine so that your Financial Planner can design an investment portfolio with an appropriate allocation of assets. If you are married, each spouse needs to fill out a Risk Tolerance questionnaire. Additionally, your Planner will ask you questions about your risk tolerance to augment your written submission. This is a tricky area because most humans are more optimistic when the economy (and your portfolio) are doing well and not as optimistic when things are going bad. You and your Planner will have a lot of discussion in this area as it pertains to designing a personalized asset mix for you.
In your first meeting with a Financial Planner, it is very likely you will be asked about short-term and long-term goals. In other words, back to the vacation planning analogy, where do you want to end up? If you are married, please discuss with your spouse and have some ideas you can discuss with your Financial Planner.
First Meeting with your Financial Planner
Now that you have completed all or most of the above, you are probably a lot more familiar with your current financial situation than you were before. You are ready for that first appointment with your Financial Planner! He or she will have had an opportunity to review the benefit and insurance documents, the financial data, and the questionnaires in advance to make for a very productive first meeting.
At this meeting, your Planner will see that you have been diligent in preparing for financial planning and can focus on your overall goals, objectives, and lifestyle that you would like to achieve. Then he or she will be able to give you the cost of developing your broad-based financial plan. Alternatively, depending on your timeframe and ability to pay for such service, your Planner may recommend a stepped approach, tackling just one piece of the financial plan at a time.
Whichever approach you decide to take, a broad-based plan approach or piecemeal, you are well on your way to reaching that financial destination.
Summary: Preparing for Financial Planning
For your first meeting with your Financial Planner, be prepared with:
- All the financial documents that are requested
- Fill out the financial data questionnaire
- Provide your monthly cash flow statement
- Set up your financial ‘dashboard,’ if one is available from your Advisor
- Fill out the Risk Tolerance questionnaire
- Prepare your thoughts on your short-term and long-term goals
With all of this in tow, you are ready for your first meeting! The better prepared you are, the better you can be served by your Planner. Your first meeting will go very well and it may even help keep the costs down.
About Kastler Financial Planning
Our core purpose is to improve the financial life for each and every client we serve. We believe that people of all income levels should have access to affordable and professional financial planning and investment management services, without the pressure or bias of product sales and commissions. Always acting as a fiduciary, the only fee we receive is the fee paid by the client. We put your best interest before our own. No product sales, no commissions, and no account minimums. Our services can be performed either as a one-time project, on-going Subscription Plan, or hourly consulting services.
We specialize in Retirement Planning, Special Needs families, business owners, engineers and technical-minded individuals that want and expect detail written Plans that can be performed either yourself or with our help.
Our suite of services also include Investment Management Services with the options of % AUM or flat-fee portfolio management. View our list of fee-only services.
We aim for a pleasant client experience whether you are in our office or remote across the country through computer screen sharing technology. View our Planning Process here and learn how to get started with a complimentary ‘Get Acquainted’ meeting.
If you have any question on how our services may apply to you, please contact me at the number below or submit an email through our Contact Us form.
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