Creating a Financial Plan

START WITH AN ADVISOR

We support the concept of professional investment advice.

Why?

Because advisors are trained to help you set goals, measure your time frame, consider your tolerance for risk and recommend the types of investments that are best for you.

We suggest you ask friends and family for referrals and interview every advisor they recommend. This is an important relationship. You’ll want to work with someone you’re comfortable sharing personal information with – and whose investment approach and areas of expertise are a good match for you.

Learn more.

SET GOALS

Are you saving for retirement? Buying a house? Paying for your child’s education?

You might have one goal or many. For every goal on your list, you’ll need to precisely define its costs, time frame and priority. There will be trade-offs but putting these details on paper will allow you to work more successfully with your advisor to create a solid financial plan. And that can help you get to where you want to go.

DECIDE ON A TIME FRAME

When will you need the money to pay for your goal?

If your goal is to put your toddler through university, you’ll need the money in about 15 years. If your child is already 15, your time frame is three years.

Defining your time frame helps you and your advisor decide which investment options are right for your goal. If the time frame is short, advisors generally recommend more stable, less volatile investments. With a longer time frame, they might recommend options that carry more risk along with more potential for growth.

Without an end point, choosing the appropriate portfolio becomes a guessing game. And successful investing is about making decisions that are right for your situation — not guessing.

An advisor can help define your time frame and suggest investments that will help you get there. More importantly, they’ll help you adjust your mix of investments as your goal approaches and circumstances change.

CONSIDER YOUR TOLERANCE FOR RISK

How will you react if the value of your investment unexpectedly drops?

Will you sell your holdings to prevent further decline? Or will you remain calm and stick with your financial plan?

This refers to your tolerance for risk. Just as important is your capacity for risk.

While you may have nerves of steel in the face of turbulent markets, that doesn’t necessarily mean you should take big risks.

Your capacity for risk is defined by where you are in your life – and how close you are to the due date of your investment goal. Your capacity for risk might increase when you get promoted, since now you’ll have more income to invest. Similarly, your capacity for risk will probably shrink as you approach the finish line of your defined time frame – when your priorities might switch from growth to preservation.

Risk isn’t necessarily a bad thing. Some degree of risk is required to reach your goals. Finding the right balance can give you the confidence to stick with your financial plan even when the market takes an unexpected turn.

Regular check-ins with your advisor can help keep your plan in sync with all the changes in your life.

PUT IT IN WRITING

Your financial plan becomes a kind of contract with yourself. It can give you the resolve to stay on track, even in choppy markets—since you’ll know exactly what you’re saving for and exactly when you’ll need the money.

But that’s not to say your financial plan should be written in granite. Life is wonderful and complicated and your plan will need to accommodate every wonderful (or just plain complicated) turn: marriage, divorce, kids, grandkids, inheritance, retirement, and more.

A qualified advisor can work with you to adjust your plan and help you stay on track.