National Association of Insurance and Financial Advisors

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Financial Planning is a big buzz word these days. Everyone knows they should have a sound financial plan, but what does that really mean and how do you go about getting one?

Let's start out by debunking the myth that a financial plan is nothing more than a smart investment strategy. That's a very narrow view of financial planning. Though extremely important, investing wisely is just one part of a sound financial plan.

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So what is the broader concept? Think of a financial plan as a roadmap for your finances. You know where you want to go. You want a comfortable lifestyle. You'd like your kids to have an excellent education. You want to maintain a nice standard of living in retirement. Maybe you want to leave an inheritance to the important people in your life. But how do you get there? To achieve these life goals, you need a plan that will help you accomplish three simple objectives:

  1. Guard against financial uncertainty: Build on products like insurance and emergency savings that provide a safety net for your financial plan when things don't go as planned.
  2. Grow your investments: Determine your asset accumulation strategy, the blueprint for reaching your savings and investment goals.
  3. Manage your retirement and estate: Manage and protect everything that you worked so hard to achieve, so that you can enjoy a comfortable retirement and your heirs, not the government, will one day be the beneficiary of your estate.

Think of objective #1 as the foundation of your financial planning pyramid. Your want to make sure that no matter what twists and turns life sends your way - losing a job, becoming sick or disabled, living too long, or dying too soon - you'll have a financial safety net in place to protect you and your family.

The middle part of your pyramid is the asset accumulation component of your plan. The decisions you make in this part of your plan will hopefully fund all of the hopes and dreams you have for you and your family.

The top part comes into play after you've achieved most of your investment goals. This part of your financial plan is for managing and protecting your assets in life and in death.

As long as you carefully address all three parts of the pyramid, your plan should help you achieve financial security in good times and in difficult ones.

Explore the rest of this section for a more detailed explanation of the basic building blocks of a sound financial plan. If, like most people, you think you need professional help assessing your financial planning needs, NAIFA can help. We can tell you what to look for in an advisor, and we have a member locator to help you identify qualified insurance and financial advisors in your community. If you need additional professional assistance like the services of an accountant, a tax attorney, an estate planner or a stockbroker, NAIFA members can connect you to these other resources.

The information on this page was provided by NAIFA

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