Financial Planning 101

When everyday routines are upended, a dependable financial road map can provide immeasurable peace of mind

There are a variety of questions associated with creating a financial plan. We reached out to Dennis Mitchell, president and managing director of Ledyard Financial Advisors at Ledyard National Bank (ledyardbank.com), to learn more about why it’s important to have a reliable financial plan, what’s involved and how to get started.

What is financial planning?

Mitchell: “Financial planning is a process that will help you determine your short, intermediate and long-term financial aspirations. Think of it as your road map to achieving your goals.  Effective financial planning is essential to help guide your decisions and actions throughout life.  Whether you are just beginning to think about your financial future, your career, entering midlife or nearing retirement, financial planning can help you succeed. Further, a financial planner can expertly guide you through a myriad of potentially daunting exercises such as evaluating mortgage options, home equity loans, bank deposit accounts and investment management options. Our goal is to educate and advise clients in a manner that delivers an easy, efficient and less time-consuming experience that puts you on a custom-designed and tailored path to reach your financial objectives.”

What is involved in the development of a financial plan?

Mitchell: “The first step is often referred to as ‘data gathering.’  This is when you develop an outline of your current financial situation — the ‘financial inventory.’ This important step will give your planner all of the important information to begin the process.

“The next step is to analyze and evaluate all of the information from the data-gathering process.  This will provide a realistic look at your current financial situation.

“Next is to develop specific goals and objectives. What do you want to accomplish? This can vary greatly for clients. A goal could be funding for college education in 10 years. Another could be for full retirement at age 60.

“Next is to develop specific and measurable action items that will be implemented to achieve stated goals. An example would be to increase your retirement savings rate. Another would be to establish a 529 plan for college savings.

“Finally, it is very important to have periodic reviews with your financial planner. I typically recommend two meetings per year. This is when you evaluate the progress being made on goals and objectives, keeping in mind that those goals may have changed due to specific circumstances such as an inheritance. In those instances, it is an entirely appropriate opportunity to make needed adjustments or recommend new action items.”

How do you get started with financial planning?

Mitchell: “The first step is to develop a relationship with a qualified financial planner you can trust and feel comfortable working with. I recommend a Certified Financial Planner, CFP.”

What is a Certified Financial Planner?

Mitchell: “The CFP designation is awarded to individuals that have several years of experience and successfully completed a series of exams developed by the Certified Planner Board of Standards, Inc. The educational program includes specific areas such as tax planning, investment planning, estate planning and risk management. CFPs are required to complete ongoing continuing education programs to ensure they remain up to date on all areas relating to financial planning. CFPs are held to strict ethical standards. They are committed to working in your best interest.”