What Is a Financial Action Plan and Why Does It Help to Have One?
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What Is a Financial Action Plan and Why Does It Help to Have One?
A financial action plan is a plan that directs how you will manage your money in order to make progress toward your goals. Simply knowing what you want will not get you there: you need a real plan to make it happen. And it should be written down, with clear goals and actionable steps that can be measured in some way. When a plan is written with concrete, measurable steps, you can gauge whether or not it has succeeded. Another benefit is that the concrete, actionable steps take the hunches and the guesswork out of your planning.
Things To Know
- A financial action plan answers the age-old question, what do you need to do to get where you need to go?
It’s all about your goals in life
At its core, financial planning simply means setting a number of goals and writing steps to achieve them with your money. You can start with just a few and make a living, breathing, flexible plan for yourself. Indeed, your plan can be as simple as writing down three to five goals and some steps for achieving them.
Professionally written financial plans typically encompass all areas of a person’s life: debt management, investing, retirement planning, estate planning, financial forecasting, insurance, risk management, assets and liabilities and net worth, and a plan for periodic review. Each item includes a set of steps for making it happen. Thus, it is not the same thing as a budget; it covers more than just how you will spend your money. Indeed, some personal financial plans are over 100 pages long. But every one is as individual as the person it is written for.
It’s a starting point for bigger things
As you succeed at your own plan over time and refine and update it, you can expand it to include more complex goals, like a retirement plan and investments. For these, the services of a professional planner may be desirable.