Financial Planning and how it is intertwined with your financial freedom concerns everyone. You can embrace the topic and deal with it. You can ignore the topic and live your life in a monetary mess. If you are ready to start, then we will begin with some interesting information for everyone to be aware of when doing your financial planning. For instance, did you know that back in the 1930's when the Social Security Administration was first created to take care of all of us when we retire, there were 40 people working for every person that was receiving benefits. In 2009 there were approximately 3 people paying in for every 1 taking benefits out and it will drop to 2 people paying in for every one taking benefits out very soon! Because of this fact, you would be well advised to make believe that social security is not going to be your retirement dream bailout. Take the position that you will have to be financially prepared for retirement and if you get to enjoy full social security benefits, well than that will just be the icing on the retirement cake that you have baked for yourself! Your financial freedom will be that much more rewarding if you can retire without social security. Of course if the program is there for you, take it!
Ben Franklin said "By failing to prepare, you are preparing to fail". So many of us just slip through life without ever giving a thought to any plan … financial or otherwise! Of course if you choose not to plan, well then THAT IS A PLAN! Not a good one, but a plan nonetheless. This lack of true financial planning will come back to haunt you in your quest for financial freedom.
So what exactly is Financial Planning? I am glad you asked because the answer is multifaceted and includes all the various life processes that you will go through. It includes significant events such as budgeting and cash flow, education funding for you and your family, investment planning, tax planning, insurance planning, estate planning, and retirement planning, all of which we will call sub-plans. Very often, people will seek out the help of a professional because of the complexity of some of these concepts. Equally important, a person needs to understand how a financial decision in one area of the master plan impacts the other areas of the plan and what the consequences will be. Your ultimate financial freedom will be based on sound financial planning of these various entities.
An effective financial plan looks at all the aforementioned sub-plans while considering one's lifestyle and resources. Sometimes patience and sacrifice are an integral part of the overall plan in order for an individual sub-plan to be carried out. Additionally, each sub-plan should have attainable goals involved with a timetable attached for achieving these goals where appropriate. Of course a good plan will be flexible enough to take into account life altering events such as getting married, buying a house and raising a family. The final point to understand is this: just because you took the time and energy to put your plan in writing does not mean that it will be carried out. You must work very diligently to see your plans to fruition. Here is where the weak among us seem to "drop the ball". Do not let that happen to you and your financial planning as your financial freedom is at stake.