Creating a personal financial plan

A financial plan is a personalized strategy for accomplishing your financial goals. While your goals can include short-term objectives — including paying off credit card debt or saving for a vacation — the impetus for making a detailed plan is the challenge of being able to achieve larger, long-term goals, such as buying a home or a second home, paying for your child’s (or grandchild’s) education, and having enough money to retire in the style you’d like.

Your financial plan may be a formal document prepared by someone with professional credentials, describing your financial goals and the specific investment, tax, insurance, and other strategies you may use to achieve them. It might be a letter or memo from the professional you’re working with, summarizing what you hope to accomplish and sketching out a broad strategy for how to approach those goals. Or you might start with a list of objectives and potential actions that you’re considering as a prelude to talking with someone who can help you create a plan.

While people have different opinions about how detailed their plans should be, having your ideas on paper is essential to getting started. And a written plan can be a valuable benchmark to help you and the professionals you work with measure your progress toward your financial goals.

Don Kittell, Executive Vice President, Securities Industry Association

Louise Yamada, Managing Director, Louise Yamada Associates