What is the difference between financial planning and investment planning? The difference is profound. If you ask an investor or business owner this question, you are likely to get a yes or no answer. For business owners and investors, they have a general idea of what they are doing, but the same cannot be said for financial planners.
So, what should a financial planner do in order to become a certified financial planner, and how can financial planning help you avoid many of the pitfalls that plague those who don’t have the best of intentions? Here are a few things that are often overlooked by those who plan, and those who do not plan well enough:
Plan: it is not enough to have a good financial plan. A good financial plan is useless if you do not perform the financial planning. The more you know about your financial future, the better prepared you will be for all the unforeseen expenses that will make it harder to reach your goals.
Understand: the goal of any financial plan is to build wealth; however, it is not just building wealth but also understanding where the money will come from and where it is going. By understanding your finances, you will be in a better position to understand the future goals of your family and your business.
Track: By the time you have laid out your own personal financial goals, you will have a sense of where you are. By measuring the progress you are making, you will be able to properly assess whether your financial plans are moving in the right direction.
Determine: once you have established your goals, determine how you are going to reach them. By being clear about where your money is going, you will also be able to spot any areas where there could be savings. This is one of the greatest advantages of financial planning.
Measure: you will want to measure your progress each and every step of the way. It is not enough to set your goals and then go about living your life as if they are unachievable. You will need to keep track of your gains and your losses so that you are able to see if your plan is working or if it is not.
Verify: you may also want to verify whether your financial goals are realistic. The best way to do this is to examine your current situation and the future situation of your family. Once you have done this, you will be able to make accurate projections about your future financial well-being.
Develop: a good financial planner will be able to recognize opportunities that were missed, and opportunities that could have been avoided. This is where financial planning can be truly helpful. It is also where the true skill comes into play.
To become a certified financial planner, you must pass two sets of exams. There are two state exams, one for all states, and one for students who plan to practice in New York. You can begin the process by taking either of these exams.
Financing yourself does not have to be difficult, but it does require planning. By doing your homework early on, you will have a much better chance of success.