Strategic Financial Planning

Why Strategic Financial Planning? While this site discusses financial planning (as a matter of fact, simple financial planning) on a personal basis, it is important to understand the strategic view to this process, hence strategic financial planning.

Let's talk about this in simple layman terms... that's what I am. ;-)

Essentially, when we talk about "strategy", we take a longer term perspective - the big picture. This means making long-term decisions to achieve the longer-term goals. After making decisions on the longer-term goals, you decide on the various ways to achieve these goals. That could be described (in a way) as the tactics. Tactics are ways that you use to achieve the immediate and short-term goals.

Put another way, you may know where you want to go financially to achieve financial independence, but you probably just don't know exactly how to get there. That's where strategic financial planning can help. Planning to achieve your financial goals requires some strategic decisions now and as you reach new stages of life. The birth of a baby, a child bound for college, starting a business, nearing retirement - each has impact upon both your financial circumstances and your goals. Being strategic about your planning allows you to take these changes in stride. It allows you to keep your goals in front of you, and to take the little but disciplined steps now that will pay off in the long run.

Keep this in mind - without accomplishing the "tactical" short-term goals, we will not be able to achieve the longer term goals that were part of the strategic financial planning process. Nevertheless, it is highly important to have a strategic overall view before narrowing down to the tactical view of the financial planning process.

Whilst we are on this topic, it wise to know the type of financial services that are available to the individual. This can be quite a "jungle". But read what I mention about financial services for the individual here.

The management of financial matters is a serious responsibility. It may be best to have an independent financial advisor who can improve planning, develop appropriate investment strategies, minimize taxes and streamline administration issues. There are scores of fee-based financial advisors who can provide this service. Do engage one who can work closely with you.

You will also need to take into consideration risk tolerance, time horizon, tax considerations and account size. Then work out a custom portfolio solution, which may include individually purchased securities and/or mutual funds. Portfolios may be Balanced, fixed Income or equity oriented. Each portfolio presents different levels of risk, and it should be best to have one which is in line with your "risk appetite". Do also note that investment performance cannot be guaranteed.

Planning should never be a "product oriented" service that is provided by your financial advisor. You should always insist that your advisor offer you independent advice and customized solutions. A comprehensive plan includes a complete review of your current wills, trusts, investments, other assets and insurance. Once completed, the plan evaluates estate tax strategies and you should have a customized investment program which meets educational, retirement and other goals. Prudent life and disability insurance recommendations should also be discussed.

Essentially, there are four key stages to strategic financial planning , all of which must be given equal importance in the planning process:

1. Review the past - Monitor recent trends in demand and expenditure. This is to get an idea of how you manage your expenses. You may be surprised at some of the expense items which are bought without thinking about their use and usage.

2. Forecast the future- Make a forecast of what income and expense items will be like in the next 12 to 36 months, taking into consideration the items that are mentioned in step (1) above.

3. Set strategies and plans- Make a decision on what you like to achieve in both the short and long term goals.

4. Set annual budgets- Make a budget and stick to it.

More will be discussed at different areas of this site. For a simple strategy for financial planning , do check this link here.