The best time to implement a financial plan is twenty years ago, the second best time is now. You may think this axiom only applies to people who are nearing middle age—in other words, people who will in the next decade or so have to consider dipping into their retirement funds. If you are young and in your prime, you have years to burn before you have to worry about retirement, right? Not really. None of us, no matter how old or how young, can afford to take the future for granted, which is why you need to start planning for your financial future now.
The Steps of Financial Planning
You will find that financial planning services often talk of the steps in the financial planning process. The following steps are often mentioned: establish the goal, gather data, analyze data, develop a plan, implement the plan, monitor the plan. Each one of these steps is important in its own right. Without the foundation of a clearly defined goal, your plan has no direction, and if you don't gather and analyze data, you really don't know what is required to meet your goal. Once you have looked at the data, you can finally decide on the actions you must take to reach the goal. You can then implement the goal. However, if you simply set your plan in motion, and then leave it on cruise control, it is easy for your plan to get off track.
Monitoring Your Plan
If you don't check in on the market, tax law, inflation rates, and so on, you may end up getting far less out of your plan than you originally thought you would. Thus, while you may not need to evaluate how things are going on a daily basis, you should set up a schedule for checking your savings, your investments, and other components of your financial plan to make sure everything is going as it should. If you find that a component of your plan is not working as you thought it would, it is better to take corrective action sooner rather than later.
Once you have a plan in place—and you are actively and routinely monitoring your plan—it is important to remember that you are not meant to serve your plan, rather your plan is meant to serve you. Thus, if you get married, have a child, lose a job, or face some other life-altering event, you may need to adjust your financial plan to compensate. While executing and monitoring a financial plan can by time-consuming and complicated, it is better to have a plan, than go through life flying by the seat of your pants never knowing when your money is going to run out.