BOSTON (CBS) – This is something I encounter all of the time. I ask people if they have a financial plan and they tell me yes. Their answer goes like this; I am investing in my retirement plan or I am investing in a college plan for my kids. Investing is only a part of a financial plan.

Financial Planning is a process. A process that should last your life time and investing is part of that process. Investing is a way for you to achieve your goals. So to set up your plan you will need to first figure out what you own, your net worth.

Then do a cash flow, figure out where your money goes each month. You want money left over to save and invest. Check my website for sample worksheets.

Then what do you want from life, what are your goals; a house, to be debt free college education for the kids, early retirement, a vacation house on the cape. Whatever it is, write it down. You now have the beginning of your financial plan.

Then figure out how you are going to reach those dreams. What will you need to do to succeed? This is where the investing part comes. You will need to save and invest to reach your goals.

There are several areas of financial planning that you should be working on; investing is just one, an important one but still only part of the big picture. Review your retirement planning, tax planning, insurance planning and estate planning. If you want the kids to go to college include college planning as well.

  • Review how much you’re saving for your goals. Retirement? College? Down payment for a house. Is it enough?
  • What’s the time horizon for your goals?
  • Review your portfolio. Where do you have your money invested? Are you diversified?
  • Do you have an emergency fund set aside to cover an unforeseen catastrophe such as a job loss, flood, or hurricane?
  • Are you taking advantage of the tax laws and only paying Uncle Sam what’s rightfully his?
  • Are you adequately insured? Home? Health? Life? Auto? Disability? Insurance should be used to protect what you have worked so hard to earn and the people you love.
  • Have you put together an estate plan? Named a guardian for the kids? Estate planning allows you to protect those you leave behind when you die.
  • Two estate planning documents you need while you are alive are a Durable Power of Attorney and a Health Care Proxy

Investing is only part of the big picture.

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