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Planning Priorities: What Is Financial Planning?

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DAVID JAMISON: Set money aside for a second. We’ll get there. We’ll talk about the numbers and all those things, but set money aside and let’s just talk about what’s important to you. Because when you … when you’re building a financial plan, the goal is not to just accumulate zeros at the end of your bank account, right? The goal is to help you do whatever it is that you want to do in your life.

VO: Financial planning is a process designed to help you reach your life and financial goals.

Financial planning is not just a time to get down in the weeds with numbers. It’s a time to think big picture about what you want your future to look like and establish financial goals that can help you get there. Do you want to travel? Move closer to family? Start your own business one day? What concerns you that you can start preparing for now? Are you worried about the rising costs of healthcare or paying for your child’s education?

It’s key that you ask yourself these questions in a way that makes you excited about your desired future and taking action on it.

CINDY SCOTT: It actually becomes enjoyable to begin to plan the future for you and your family, and it also doesn’t require a ton of sacrifice, which people think, “She’s going to put me on a budget. That means it’s going to limit what I can do, limit my enjoyment.” It actually doesn’t. It really frees you to really focus on the things that you say are most important to you, and those things could change over time.

VO: From there, start getting a clear look of where you’re at now. This means collecting all the data on your assets and debt, as well as your income and expenses.

CINDY SCOTT: Just take stock of everything, where you are relative to those goals, and if you’re not saving anything, then that’s pretty easy. It’s “Hey, we don’t have any of that. This is something we need to start.” OK. And then we can fill in the blanks with how much is it going to require, how to invest it, what type of accounts to invest in.

VO: Once you’ve compiled and organized all of that information, the next step is to figure out where you want to go from here and turn those vision statements into numbers and dates. Savings goals, investment targets, retirement date, and other goals should be listed and prioritized. Start with your needs, then include your wants and wishes. The more specific you are when defining these goals, the more actionable they’ll be.

LEO GONZALEZ-SOUTO: I think it’s breaking it up in pieces, and that is achievable once you have prioritized and defined what are the most near-term objectives that need to be addressed. If you generalize the goal, it’s going to take longer, and you’re definitely going to keep pushing it aside. I did that myself, so I definitely know what that is like.

VO: With all of this in front of you, you can begin to prioritize your goals based on how important they are and the time it would take to reach them. These decisions will shape your journey from here to where you hope to be. For those that are further off-course than they thought, it’s important that you face any hard choices and make your needs the top priority.

CINDY SCOTT: Sometimes the fear of doing the plan and putting everything in black and white is more of an impediment than anything. Sometimes the plan turns out much better than you anticipate. And it may not, OK, but what I’m saying is we won’t know until we put the plan together and then we can—rather than living in denial or just having a fear of facing what the reality is going to be—now we can know, and we can talk about some things we can do to still help you achieve some of those goals, but maybe in a way that was different than you initially anticipated. 

VO: To learn more about making a plan to reach your goals, visit schwab.com/plan.

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Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

Investing involves risks including possible loss of principal.

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