The 7 Step Process of an Empowering Financial Plan

Step I: Setting Goals

Step I: Setting Goals

The place to start in financial planning, as with any planning, is the goal.  While most people have goals, they tend to be vague ideas rather than clear written statements.  They tend to have more to do with strategies than ending points.  At Empowering Financial, we help you to refine your goals to clear images of your financial future and achievements.  It is key to stay with “what” questions and avoid the how until there is complete clarity on the what. For instance, “What do you want to do when you retire?” Some people want to stay home and care for their grandchildren while others may want to travel around the world.

If you start with the “How” questions you may end up limiting yourself to things you think you know how to do rather than to search your heart and soul for what you want. Once you reach clear goals, its often quite an energizing and empowering feeling. From there, it is often much easier to find money to save, to get the right motivation to do what needs to be done to accomplish your goals. We put the focus on making your money count for what really matters to you.

 

Step II: Prioritizing Your Goals

Step II: Prioritizing Your Goals

Many people have multiple goals.  Retiring at age 65.  Paying for the twins’ college education. Paying off the house by age 70. In some cases, its not possible to fully achieve all of them. Its therefore important to prioritize the goals so we know what we are trying to achieve and in what order.

Step III: Evaluating Your Resources

Step III: Evaluating Your Resources

Here’s where you need to figure out where you currently are.  What’s your annual earnings.  What assets do you have, how much are they worth, how are they invested.  What other planned expenses or inflows do you have.  When will they come and how much.  Replacing a car, or a college education are examples of such expenses.  An inheritance, income from the sale of a home or business are examples of such income.

 

Step IV: Creating Viable Strategies

Step IV: Creating Viable Strategies

While all of the foregoing steps are largely a result of my clients’ work, or at least largely dependent on their input, this step is usually something that I do back at the lab. While my clients have as much input in this step as they want, the step usually falls largely on me. I take all the input which, like a GPS, gives me a starting point and an ending point. I then put together some alternative ways of getting there. If this were a trip, we’d think about whether we want to take the streets or the freeway, what kind of traffic might we expect (eg. how will taxes slow us down). The different strategies will each have their own specific characteristics and take into account my clients’ feelings about risk, their timeline for retirement, etc.

 

Step V: Selecting the Preferred Strategy

Step V: Selecting the Preferred Strategy

This is where you, my client, will choose the strategy that works best for their particular situation. Considerations at this point are things like risk tolerance, tax consequences, and cash flow needs. With all the facts and assumptions out in front where they are visible, decisions can be made in a more methodical manner. I offer guidance where needed and wanted at this point, but ultimately, my clients are making the choices.

 

Step VI: Implementation

Step VI: Implementation

This is where once we have decided on a strategy together, I begin to put together the implementation.  Depending on the strategy, different steps will need to be taken.  Again, here the work is largely on my shoulders.

Step VII: Monitoring

Step VII: Monitoring

When the GPS plans a route for me and gives me instructions along the way, inevitably I will miss a turnoff, encounter a road or exit from a road that no longer exists.  I will need to make a detour for gas or food or simply to take a look at something unique I spied out the window.  In life, similar events happen.  Births and deaths, weddings and divorce, accidents and illnesses, and changes in interests/goals can happen.  I monitor all my clients with quarterly phone calls and annual meetings to make sure everything is on track. My clients are always welcome to call in for questions or issues that arise between other scheduled calls.