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October 19, 2012

Why Financial Planning is Important

The following is from “Why Financial Planning is Important” recently published by NAPFA, National Association of Personal Financial Planners.

56% of U.S. adults lack a budget

40% of U.S. adults are saving less than in 2001

39% of U.S. adults have ZERO non-retirement savings

39% of U.S. adults carry credit card debt from month to month

31.4% of all mortgage borrowers are underwater

41% of Baby Boomers do not have a will

50% of Americans with children do not have a will

25 million people are under insured

16% of Americans are very confident that their investments will increase in value

23% of Americans are not at all confident in having a comfortable retirement

1991 11% of workers expected to retire after age 65

2012 37% of workers expect to retire after age 65

2 in 5 U.S adults gave themselves a C, D, or F on their knowledge of personal finance.

If people took the time to educate themselves on basic financial principles, they would understand the importance of prudent financial planning – for the short and long term.

Independent, qualified financial planners who have the education, experience, knowledge, and character can guide people on their personal financial needs.

The Financial Planning Process generally includes:

Sharing your life goals, values and philosophies about money and finances with your planner.

Cultivating a relationship with your planner based upon mutual trust and respect.

Determining your net worth by identifying all of your assets and liabilities.

Gathering detailed information about your daily, monthly and yearly expenditures.

Constructing a cash flow statement based on your income and expenses.

Analyzing your spending habits and developing q workable budget that you can stick to.

Gathering and analyzing financial statements from banks and brokerage, estate documents, insurance policies, real estate holdings and employee benefit plans.

Discussing various life planning assumptions (rate of return, inflation rate, savings ratio, etc.), identifying long and short goals, and then mapping out various paths to take to realize those goals based upon assumptions.

At all times during this process, your planner will be acting as a fiduciary agent for you – your best interest will always be paramount.

“Failure to plan is planning to fail” old proverb frequently attributed to Winston Churchill

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