Investing and Financial Planning
Ioannis Evangelos Haramis
What exactly is financial planning, and why is it so important?
Financial planning is the process of determining how to manage
money, investing, present and future financial goals, and the
strategy that should be undertaken to obtain them.
Because our goals and desires change as we do, financial planning
and investing is a task that is never finished. How we are financially
able to reach these goals, and the risk we are willing to take
to get there, necessarily means that any financial plan must be
specifically tailored for an individual or family.
Financial planning begins by taking into account each individual's
assets and liabilities at that particular point in time.
The asset category includes life insurance and monetary investments
of all kinds, along with physical assets such as a home, automobiles
and other items.
Liabilities may range from personal loans, credit card debt, and
loans taken to obtain hard assets, such as mortgages.
Next is where sources of ongoing income and increases in hard
asset wealth enter into the equation. Income most usually is earned
by employment, but other sources, such as possible inheritances,
must also be considered. Increases in hard asset wealth, such
as rising home prices, will be affected by general economic conditions
as well as owner enhancements.
From here, things get trickier, and this is where the true planning
Our particular stage in life -- whether we are young, old, or
somewhere in the middle -- will usually lead us to desire a particular
set of goals. Financial planners often break down our life cycles
into distinct phases. Which phase we are in is often determined
by age but will also be dictated by how much risk we are willing
Younger people are most often described as being in an accumulation
phase. Their earnings have not yet hit their peak, but at the
same time they are striving to obtain both hard and soft assets.
Examples here include saving for a new home or a child's education.
Risk assumed here will be tempered by the time constraints of
these goals as well as individual risk tolerance. In general,
the longer the time frame, the more investments in the aggressive
category may be considered.
The other phases extend to middle age and beyond to retirement.
Our middle age years often find us at the peak of our earning
power, with many of our former goals satisfied. This will mean
greater savings are possible, and as time progresses towards retirement,
our tolerance for risk will necessarily diminish.
Financial planning takes all of this into account and more. Other
factors, including planning for health care and other insurance
needs, preparation for emergency expenditures, tax and estate
planning and the like will all be part of the strategy.
Unexpected windfalls may also enter into the picture. Saving for
retirement becomes increasingly important as the time earned income
will end draws nearer.
All of these variables add to the importance of financially planning
across all stages of one's life. It is a concept that encompasses
your total financial picture -- both in the present and for the
About The Author
Copyright © I.E.C. Haramis
Ioannis - Evangelos (Akis) C. Haramis was born in Athens, Greece
in 1951. Studied Business Administration, Marketing and Economics
in Athens, Greece, in Chicago, ILL and in Boulder, CO (USA), as
well as in Leuven, Belgium. He has been active in the stock markets
since 1972 as an investor, stockbroker and consultant to individual
investors and various funds. Since 2002 he is New Business Development
Managing Director at a leading Investment Bank and always active
in the stock markets.