Retirement Ready: Creating a Financial Planning Philosophy

philosophyI have learned that I did my best at something when I had a plan and I practiced. To start you have to have a philosophy, an idea or belief about your financial plan that you live by.

When I sat for the Chartered Financial Analyst examination, there are three, I would get the syllabus, practice questions and practice exams and lay them out and create a calendar of what and when I was going to complete each task.  My philosophy was that if they recommend studying 250 hours for the exam, then I should plan from January to June to get in 250 hours of studying with leeway in case something comes up.  And that is what I did. Each week I would whip out my agenda and follow what I needed to get accomplished that week.

Why does philosophy matter?

Philosophy matters because it will help you make decisions when things are difficult or surprise you.  Second, is that you and your advisors, whether they be lawyers, accountants or insurance professionals should know where you stand. Third, to maximize your wealth you need a road map for how you will get there.

There is a great deal of leeway in choosing a financial plan and implementing it.

How can you find a plan that is right for you?

A plan is essentially composed of six components: establish the scope, gather data, analyze the situation, craft recommendations, implement the recommendations, and monitor the plan.

More specifically, I advocate the following to be included in a plan:

  1. 3 to 6 months of money for unexpected necessities
  2. Pay yourself first!
  3. If owning a company, maximize the benefits and the tax benefits accrued to it.
  4. Plan to eliminate your mortgage.
  5. Protect you and your family: For healthcare and the unexpected.
  6. Invest in things that are on sale and have momentum.
  7. Invest for growth – create recurring revenue for you and your family.
  8. Maximize Social Security, Medicare and other government benefits
  9. Create a legacy.

The details and situation can vary from one person to the next.   Before you go out and create a plan, determine what your philosophy is. It will help you stay true to your plan from now until retirement and beyond.

To learn more about James, view his Paladin Registry profile.

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