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7 Important Questions a Financial Plan Can Help You Answer

Carrie Schwab-Pomerantz on

Dear Readers: October is the month for fall colors, a chill in the air, Halloween -- and financial planning. Yes, October is National Financial Planning Month. And while that might not stir your senses in quite the same way, it really could make a significant difference in your ability to enjoy every season to the fullest. So even though you may believe that financial planning isn't important for you, I ask you to hear me out.

A lot of people think they don't have enough money to need a financial plan or that it costs too much. They're putting the emphasis on "financial." To me, the emphasis should be on "planning," because having a financial plan simply means knowing where you want to go and figuring out how best to harness your resources to get there. And it's not just about money. It's about your aspirations, your priorities for you and your family, and how to protect yourself both now and in the future.

Real Questions for Real People

I can't emphasize enough that a financial plan isn't something esoteric or only for wealthy investors. It doesn't have to be complicated or take a lot of time. And nowadays, it doesn't have to be expensive. There are many ways of getting a financial plan -- from DIY to online to in person.

At its essence, a financial plan answers real questions for real people, whatever their stage of life or how much money they have. So, to pique your interest and perhaps get you thinking differently, here are seven questions a financial plan can help you answer and why each one is important -- for everyone.

1. How Realistic Is It to Reach All of My Dreams and Goals?

 

You may have a general idea of what you want to accomplish -- buy a home, send your kids to college, take annual vacations or retire early. But the only way to make any of that happen is to get specific. A financial plan starts with helping you zero in on what you own and what you owe, and clarifies how your income can cover essentials as well as savings and discretionary expenses. It will help you focus on your goals, put a dollar amount on each and create a realistic timeline for achieving them.

2. What Should I Do First?

Trying to save, invest and pay off debt all at once can be overwhelming. A basic plan helps you prioritize, whether you're creating a savings strategy, trying to reduce debt or both. It can give you a blueprint for taking action; for example, getting a 401(k) match first, paying off nondeductible high-interest debt next and then contributing to your child's education. These aren't high finance issues; these are everyday issues.

3) How Should I Invest for Retirement as Well as Shorter-Term Goals Like a Down Payment or Kids' Education?

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