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Six Steps to Enhancing Your Financial Fitness

J Terwilliger 2014
James P. Terwilliger, PhD, CFP®
Senior Vice President, Senior Planning Advisor
[email protected]
(585) 419-0670 x50630

Most of us will never win the lottery...or inherit a windfall from a rich uncle...or pick the next million-to-one hot stock.

That's all luck.

Luck will not secure our retirement. Nor will it fund our children's educations. But smart, disciplined planning can help us do just that and much more. It can help us reach our goals – and not just financial goals. As we know, financial resources are only a means to an end. The end is a fulfilling life with dreams to be lived and achieved.

It is never too early and never too late to take charge of one's financial future through formal financial planning. Financial planning is not just about investing. It's much broader. It's really about getting one's entire financial house in order, much like partnering with a trusted physician to establish and maintain physical well-being.

Disciplined personal financial planning helps to ensure:

  • you and your family are adequately protected from undo risk
  • you are taking advantage of available income tax deductions and credits
  • you are aware of tax-advantaged ways to save for college and are saving at a rate that will meet your funding goals
  •  your investments are adequately diversified within an asset allocation consistent with your risk tolerance, time horizon, and financial goals
  • you are saving at a rate that will meet your retirement income goals and timetable
  • your estate plan is consistent with your charitable and legacy interests, asset titling, and life-insurance/retirement-plan beneficiary designations

Comprehensive financial planning is a process, not a one-time event or product. The process typically consists of six steps:

  1. Develop goals and set priorities: Goals are a must for any plan. Where do you want to be and by when? What do you want to accomplish? Prioritization is important since, many times, it may not be possible to achieve all goals concurrently.
  2. Assess assets/resources: Taking a current-state financial snapshot establishes the starting point. This step is data-intensive and involves documenting all your holdings; cash flows; insurance; taxes; wills; trusts; estimated future assets, income, and expenditures; and any special circumstances.
  3. Identify barriers to reaching goals: Can all goals be met, and if not, why not? Are there competing goals, and if so, which are more important? What are potential barriers and what tools or approaches are available to eliminate or bypass any barriers?
  4. Incorporate strategies into an integrated plan: The key word here is "integrated." Since goals and associated strategies are usually interdependent, the pieces of an effective plan are assembled in a way that optimizes outcomes. In the absence of such integration, the individual pieces are not linked and financial decisions can become disconnected and even arbitrary.
  5. Put the plan into action: This is an often-ignored critical step. A plan is worthless if it is not implemented. An action checklist – detailing what is to be done, by whom, and by when – can be a big help.
  6. Monitor progress, evaluate results, and adjust plan as necessary: Is the plan working? Has something changed – your goals or your circumstances? Life happens. Things change. It is important to keep the plan flexible to respond to changes and, when necessary, reset the course.

This takes us right back to Step 1, and the process repeats. When done well, comprehensive financial planning becomes a dynamic, life-long journey. It provides a framework for making ongoing financial decisions consistent with long-term goals.

Most folks do not have the knowledge, training, time, or desire to guide themselves through the process. Partnering with a trusted financial planner to provide the expertise and discipline is normally advised. A planner can be particularly helpful in guiding the implementation step.

When searching for a planner, be sure to talk with several, learn about their qualifications and experience, find out how they are paid (fee only vs. commission), and determine if they are selling product. You will probably be happier working with a "pure" planner vs. one who may use the plan to peddle a product.

James Terwilliger, CERTIFIED FINANCIAL PLANNER™, is Vice President, Financial Planning, Wealth Strategies Group, Canandaigua National Bank & Trust Company. He can be reached at 585-419-0670-50630 or by email at [email protected] This article previously appeared in Business Strategies Magazine.

Financial Planning with CNB

CNB is pleased to provide clients with comprehensive long-term strategies for personal financial planning that help clarify goals and simplify the issues related to achieving them.

We are committed to helping our clients address the full spectrum of financial planning issues, including:

  • Investment
  • Education
  • Risk/insurance
  • Tax Planning
  • Retirement
  • Estate planning

If you would like to learn more about this service, please email [email protected] or he can be reached at (585)419-0670 ext. 50630.