Nextwave Finance

DIY: 5 Steps to Becoming Your Own Financial Planner

September 24th, 2007 | by rachel |

It seems that more and more people are talking about their financial planners these days. At times, it feels like not having a financial planner means that you are not serious about money or that you are just not serious about doing smart things with your money.

I don’t buy that idea! I think that it is possible to be VERY serious about your money without paying someone called a “financial planner” to give you advice that you can get for yourself. After all, nobody is REALLY as concerned about your money as you are…are they?

According to the Certified Financial Planner Board of Standards, financial planning is defined as “the process of meeting your life goals through the proper management of your finances.” With a small investment of time and energy, these 5 steps will help you become your own financial planner.

STEP 1: Understand your “money personality”

• Are you a spender or a saver?
• Do you pay close attention to your finances or do you only think about them when there is a problem?
• Are you confident in your knowledge and understanding of personal finances?
• What is your philosophy about debt?
• How do you think your “money personality” today was or was not influenced by the family you grew up in and the way money was handled there?

You need to be honest in this process and don’t rush through it. Write your thoughts down about money and/or questions that you have regarding financial matters.

STEP 2: Evaluate your current financial situation

• Do you have debt that you are working to pay off? If so, what kind of debt is it? To whom do you owe it? How long will it take you to pay it off?
• How many credit accounts do you have and who are they with?
• What is your credit score?
• Where are your bank accounts located and how much money is in them?
• What insurance policies do you have and who holds them?
• What retirement accounts do you have and how are they being funded?
• Is your income adequate to cover your needs? If not, what can you do to raise your income?

While completing this step it would be an excellent time to gather and record all the information necessary for creating a written financial organizer. Not only will it be helpful for you as you manage your finances, but it will be a wonderful document to have available if something happens to you and someone else has to handle your financial matters.

STEP 3: Identify your financial goals

Do you want to…

• Get out of debt?
• Buy a house? Pay off the house you are in?
• Save money for college?
• Secure your retirement?
• Start a business?
• Buy a 2nd home?
• Invest in a hobby?

In order for goals to be achieved, they need to be realistic. Chances are, whatever your financial goals, they are going to take some time to achieve. Make sure that you identify your goals as specifically as possible including manageable steps for achieving them AND time frames that help you maintain your attention on them.

STEP 4: Research, Learn and Make A Plan

Once you know what your goals are, you have to figure out how to achieve them. The internet is an excellent place to find LOTS of information about anything relating to finances. Do be careful, though, to gather information from several sources. Just because it is published on the internet does not make it inherently accurate. Books, magazines and podcasts are available on ALL types of personal finance issues and you really cannot go wrong from getting as much information as you can get your hands on.

If necessary, don’t hesitate to make appointments for consultations with professionals in specific areas (accounting, law, estate planning, insurance, etc.) that you may be dealing with. Pay them for a little bit of their time to see what information they can provide relative to your situation. If you already have established relationships with professionals in these areas, use the people you know. If not, ask friends or the local Chamber of Commerce for their recommendations. Being your own financial planner does not mean that you cannot get ANY help! It only means that you are taking the MOST ACTIVE role in the process.

Perhaps the most important element of Step 4 is making a plan. More than likely, you will want to make a written plan that lays out everything relative to achieving your financial goals. Certainly, a plan like that can “look” many different ways. YOU need to work with YOUR PLAN and make it something that is meaningful and useful to you. Format it in such a way that you can (and will) use it as a reference tool during your financial journey.

STEP 5: Take action!

The work you have done so far is EXCELLENT and it gives you a great opportunity for success. None of that work will matter at all, however, if you don’t take action and actually DO what you have set out in the plan. Remember, anything you do will get you that much closer to the next thing you can do! Don’t forget to…

• Start slowly and take small steps.
• Celebrate any progress.
• Make a game out of it to add some entertainment value to the process.
• Don’t go it alone. Involve your spouse, children and extended family if it will help keep you motivated.
• Commit to stopping the bad habits that are sabotaging your financial goals.
• Monitor your financial situation REGULARLY.
• Set specific time frames for reviewing and adjusting the plan as your financial situation changes.

For more information about Personal Financial Planning, visit these sites:

Discover Your Money Personality

Money Personalities of Children

The Financial Planning Association

eFinPlan - a personal, Internet-based financial planning program