2022 AFBA Financial Planning Guide

Chapter 8. Principles of Financial Planning The Need For Financial Planning................................................................................................ 8–1 How To Start A Financial Plan. ................................................................................................... 8–2 Financial Ratios. ........................................................................................................................ 8–3 Debit or Credit ........................................................................................................................... 8–4 Some Thoughts On Financial Planning. ...................................................................................... 8–5 Personal Data Worksheet........................................................................................................... 8–6 List of Important People Worksheet........................................................................................... 8–7 Family Balance Sheet................................................................................................................. 8–8 Budget Worksheet...................................................................................................................... 8–9 Financial Goals Worksheet....................................................................................................... 8–10 Planning Actions Worksheet. ................................................................................................... 8–11

your family is protected in the event of your premature death or an unfortunate disability. 8–2. HOW TO START A FINANCIAL PLAN. One of the most difficult aspects of financial planning is getting started. Un­ like death and taxes, financial planning is not a hard fact of life and it is easy to put it off until tomorrow. However, death and taxes are two of the most important reasons why you should not delay starting your plan. Aside from the paperwork, there are two difficult aspects of financial planning. The first is honesty — you must be honest with yourself. Since this will be your plan, you fool only yourself by being overly optimistic or exceedingly pessimistic. Second, you must realize that a financial plan is not a magic cure–all; you will not get rich overnight and you will have to adjust your plan from time to time as future uncertainties turn into realities.

8–1. THE NEED FOR FINANCIAL PLANNING. There are no secret formulas locked behind the doors of financially successful individuals. Most of them attribute their success to hard work and financial planning. Planning which established certain goals and planning they followed to achieve those goals. They did not start with thousands of dollars to invest. In fact, many financially successful people start with nothing more than a plan — A Financial Plan! Financial planning does not require a college degree, you do not have to be a financial wizard, and it does not require a bevy of lawyers, accountants, or professional advisors to get started. What you need is a willingness to devote a little time and effort to develop a plan, combined with a true desire to make it work. Financial planning can help you build a sizable estate. It can help fight inflation and higher taxes. It can provide for financial security and peace of mind in knowing

CHAPTER 8: PRINCIPLES OF FINANCIAL PLANNING

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