When we think of financial planning, we often think of the funds we have invested or the assets we possess. However, financial planning is actually about far more than our net worth in investments or assets. Financial planning is about the achievement of our most deeply held goals and objectives.
The goals of high-net-worth individuals and families can be very diverse. You might want a home or a second home, children, and a long-term relationship with a charity that reflects your values. Your neighbor might want to plan extensive travel and a successful business to keep in the family through successive generations.
The first step toward financial planning and an active financial strategy is to define specific goals for you and your family. Your goals need to be acquisitions, events, and actions that make your life the one you most want to live. You also need to discuss long-term financial planning in San Antonio with your spouse and partner, to make sure you’re on the same page about how you envision your future. How many children do you want? Do you want a second home? If so, where do you want it to be located?
It can help, of course, to divide these into short-term goals (less than one year) and long-term goals (five years or more). But long-term goals are likely to have the most impact on your financial planning in San Antonio, Texas. Why? Because when you think about it, almost every financial decision has an effect on your long-term goals.
Decisions Need to Align with Long-Term Financial Goals
Let’s say you also want to own a home, save and invest in your children’s education, and retire at 60. These may all be long-term goals to discuss with your financial planner.
But, like a business, every decision you make needs to align with the long-term goals to optimize their realization. Let’s say that you review your credit card spending at the end of the year and aren’t happy with how high it is. You determine that a short-term financial goal should be reducing your credit card debt to 0. That might well be very much aligned with your goals, as paying a credit card debt every month over time can impact the money you are putting toward a home down payment, savings for your children’s education, or investing for your retirement. Credit card interest is very high and the more you become free of payments based on high interest, the more your money can be used to grow toward your goals.
Let’s say that you also want to travel extensively this year. Vacations and travel are certainly valid uses of your time and money. But you also need to consider how the cost of every year’s vacation affects the long-term goals you’ve identified. What if your planned retirement is 10 years away and you will need more funds put into retirement investments to retire at 60? A financial advisor can help you determine whether a less extensive vacation this year can help you meet your long-term goals more effectively.
Long-Term Goals in Comprehensive Financial Planning
Comprehensive financial advisors can help you in many areas of your financial life, both in the short term and the long term.
First, your financial advisor will generally review your income and expenses, to get a sense of your cash flow. They may make suggestions to optimize your cash management.
Second, they generally review your investments and your retirement planning. Both your investment and retirement portfolios need to be diversified so that you are both positioned to realize optimal gains and protected against downward swings in the stock, bond, and other financial markets. They will assess your risk tolerance.
Third, they will review your insurance needs. Insurance is a vital protection against the risk of loss of your assets, such as a home or car. Life insurance is important as protection against lost earnings if you have young children or a spouse who depends upon your income. Health insurance protects you and your family against high costs if you have an illness or suffer an accident.
Fourth, they will set up an estate plan. An estate plan sets up the disposition of your assets to your heirs should you pass away. A Last Will & Testament sets forth where and to whom you would like your assets to go, and can also specify your wishes for guardianship of minor children and other important end-of-life decisions. A Trust can be set up for the disposition of assets while you are still living or can streamline the disposition of your assets when you pass away. Estate plans also include setting up Powers of Attorney for health and financial decisions should you become incapacitated.
Most financial advisors also make plans to help ensure tax efficiency and work with your accountant to make sure that you pay the least amount of tax required. Tax efficiency is especially important to take account of while making long-term strategic plans as it can minimize your taxes and maximize your assets over time.
Revisiting Long-Term Goals
It’s in the nature of long-term financial planning that your long-term goals need to be revisited periodically. First, over time, your goals will be realized! If you’re saving up to buy a home, for instance, your down payment and purchase will essentially free up the funds you’ve been putting aside for that goal every month. At that point, it’s time to determine the next goal those funds can be put toward.
Second, life events may cause a change in your goals. Marriages, the birth of children, changes in jobs or businesses, deaths, and divorces can all change your financial plan.
Third, your goals can change simply because you change! You may develop new interests and want to strategically plan to reach goals you would never have thought of in the past.
Because of the inevitability of changes in goals, it’s prudent to review your short-and long-term goals annually with your Texas financial advisor.
PAX Financial Group: Long-Term Comprehensive Financial Advisors
At PAX Financial Group, our CERTIFIED FINANCIAL PLANNER™Professionals are fiduciaries who put your best financial interests first at all times. We serve clients who share our Judeo-Christian values and specialize in comprehensive financial plans crafted to meet your long-term goals. Contact us today.
