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When you plan, you identify financial goals and develop
strategies to meet them.
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When you do financial planning, you're looking toward the future, specifically
at building the kind of
security you'd like to have and being able to afford the lifestyle
you want. But to plan successfully, you also have to evaluate the present, including
the financial choices you're making now. Otherwise it's too easy to find
yourself making random decisions that won't move you toward your goals effectively,
or that may even interfere with achieving them.
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It's never too soon, or too late, to begin financial planning.
Financial planning is important, whether you've just started working or are
thinking seriously about retirement. And it should be a continuing process, so that
you can evaluate your progress, revise your goals, and update your strategies on
a regular schedule.
Without planning, you run certain financial
risks. You may not have enough in reserve to meet expenses
you're expecting, like the down payment on a home or the price of a college
education. You may have to revise your retirement plans. Or you might leave your
family without enough to live comfortably if something happens to you.
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PLANNING STRATEGIESIn financial
planning terms, creating a strategy means defining the steps you'll take to
accumulate the money you need to pay for the things you want.
To begin, you need a clear sense of what your goals are, what they will cost, and
how much progress you've already made toward achieving them. For example, you
will have to evaluate the performance of the assets you already have. And you probably
will have to find ways to increase the amount you're investing and select how
you will invest it.
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