Getting Started with personal financial planning

This blog and its contents are intended for general education and information.
This blog is not intended as financial advice.  Prior to implementing an investment plan, a person should thoroughly consider their own risk constraints and objectives.

A very common question individuals pose to the financial advice community is "how do I get started?"  This is often followed by "how much money do I need to make this worthwhile?"

Both questions are valid, but there exists a temptation to make the answers too simplistic.  The best answers are that each person's situation is unique to them, and that any financial plan or investment approach needs to be highly tailored to that person.

Having said, there is a general top down approach that DRW Financial would take with a prospective client:

1. Take inventory of your life.  What is important to you and your family? This question has little to do with money and a lot to do with values.  A later discussion of risk tolerance and investment objectives should flow from these top level values.
2. Make a budget.  Too often, families have little visibility into the details of their budget.  Sure, it is obvious that the paycheck comes in and the rent/mortgage payment goes out, but it can be truly helpful to quantify how much spending goes to different categories like Entertainment, Dining Out, Vacation, etc.  Some people will track their actual spending for a month or two in a notebook or spreadsheet, or perhaps use a smartphone app that consolidates credit card and bank info.
   
   The budget also helps to inform important decisions, like how large a "reserve" fund a family may need to maintain before allocating money to investments.
3. Talk about goals.  For many people, retirement looms large in the mind when considering savings and investment plans.  Other common goals deal with college savings for children, vacation savings, maybe a plan to save up for a second home...financial goals run the full spectrum, and again should reflect the unique circumstances of the individual or their family.
   
   A good financial plan will sort the goals into a list based on priorities, and further sort according to risk tolerances specific to each goal.
4. Assemble the team.  Financial planning for a family can easily involve a number of key players.  Each family member has a role to play, and it is common for a financial adviser to work with the family's accountant, perhaps legal counsel, and third party players like an insurance agent to make sure that the whole plan fits together well.
5. Implement the plan.  This is where the rubber meets the road, and where money gets involved.  This is also only the beginning: a financial plan should be a living, evolving work.

These 5 steps provide a very general overview for the "how to get started" conversation.  The second piece, as to how much money is necessary to begin an investment plan, will largely depend on the above - there is no magic number or absolute minimum necessary to get started on your financial goals!