The world of finance can be confusing to an “outsider,” especially when it comes to understanding the lingo. The technical jargon can be so overwhelming that it pushes people to give up trying to understand the basics, which can lead to procrastination and poor decision-making.
If you are feeling overwhelmed or confused by it all, here are 6 key aspects that can jumpstart your journey to financial literacy.
1. Basics of Financial Planning
Mastering financial, economic, and cash flow/debt management concepts is a great first step. Ask yourself: What do I own? How do I own it? What do I earn? What do I owe? By answering these simple questions, you are starting to build an understanding of your financial status.
2. Investment Planning
Investment planning is all about making your money work for you. Work with a trusted advisor who can help you build a diversified portfolio, manage your risks, and include a variety of investment vehicles.
3. Retirement Savings and Income Planning
Setting money aside today—delayed gratification—will allow you to have more choices in the future. A well-performing retirement fund needs consistent analysis, an evaluation of plans, and an understanding of Social Security, Medicare, and Medicaid.
4. Tax and Estate Planning
Understanding laws and management techniques related to taxes, property transfer, and estate planning can help you accomplish current and future financial goals.
5. Risk Management & Insurance Planning
Evaluating risk and assessing different types of insurance can help you protect your family, decreasing your anxiety about what may happen in the future.
6. Psychology of Financial Planning
When making financial decisions, never underestimate the power of fear and greed. Assess your feelings and behavior, then adjust accordingly.
How can MAI advisors help you understand this process more completely?
- A financial advisor can help you develop a clear picture of your current financial status by reviewing income, assets, and liabilities and by evaluating your insurance coverage, investment portfolio, tax exposure, and estate plan.
- Our advisors work with clients to establish individualized, prioritized financial goals and time frames for achieving them.
- We implement strategies that address current financial weaknesses and build on strengths.
- We can utilize solutions and services that are tailored to help you meet your goals.
- MAI advisors monitor your plan and make necessary adjustments as goals, time frames, and circ*mstances change.
Authored by Mark Van Drunen, CFP®, Regional President and Managing Director, MAI Capital Management | Information updated as of 03.28.2023.
Please send your questions, comments, and feedback to: info@mai.capital. The opinions and analyses expressed herein are subject to change at any time. Any suggestions contained herein are general, and do not take into account an individual’s or entity’s specific circ*mstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Distribution hereof does not constitute legal, tax, accounting, investment or other professional advice. Recipients should consult their professional advisors prior to acting on the information set forth herein. In accordance with certain Treasury Regulations, we inform you that any federal tax conclusions set forth in this communication, were not intended or written to be used, and cannot be used by any taxpayer, for the purposes of avoiding penalties that may be imposed by the Internal Revenue Service.
FAQs
Financial planning process The financial planning process is a logical, six-step procedure:8 • determining the current financial situation, • developing financial goals, • identifying alternative courses of actions, • evaluating alternatives, • creating and implementing a financial action plan, • reevaluating and ...
What are the 6 components of financial literacy? ›
Here are six core financial literacy categories to help take your money skills to the next level.
- Know What You Earn. ...
- Spend With Purpose. ...
- Save and Invest For Your Future. ...
- Borrow Wisely. ...
- Give Generously. ...
- Protect Your Wealth Long-Term.
Strategies of financial management
- Analyze financial statements. Regular evaluation of financial statements is an important step to take when determining financial strategies. ...
- Evaluate profits and losses. ...
- Create and monitor budgets. ...
- Monitor debtors. ...
- Update and safeguard records. ...
- Track your expenses in real-time.
Financial planning process The financial planning process is a logical, six-step procedure:8 • determining the current financial situation, • developing financial goals, • identifying alternative courses of actions, • evaluating alternatives, • creating and implementing a financial action plan, • reevaluating and ...
What are the six key components of a financial plan? ›
What are the six key components of a financial plan? 1) budgeting and tax planning 2) managing your liquidity 3) financing your large purchases 4) protecting your assets and income 5) investing your money 6) planning your retirement and estate.
What are the 6 elements of financial system? ›
This course serves as an introduction to the financial system. It breaks down the financial system into its six elements: lenders & borrowers, financial intermediaries, financial instruments, financial markets, money creation and price discovery.
What are the six principles of personal finance? ›
Watch to learn about six personal finance topics that can have a big impact on your life: budgeting, saving, debt, taxes, insurance, and retirement.
What are the six pillars of financial planning? ›
Financial planning areas include financial management, insurance and risk management, investment planning, retirement planning, tax planning, estate planning and legal aspects.
What are the six steps in the financial management process? ›
The Financial Planning Process
- Step 1: Set Goals. While this seems pretty basic, this step often gets overlooked. ...
- Step 2: Gather facts. ...
- Step 3: Identify challenges and opportunities. ...
- Step 4: Develop your plan. ...
- Step 5: Implement your plan. ...
- Step 6: Follow up and review yearly.
The financial system can be broken down into six main parts: money, financial instruments, financial markets, financial institutions, regulatory agencies, and central banks.
Financial Planning Process
- 1) Identify your Financial Situation. ...
- 2) Determine Financial Goals. ...
- 3) Identify Alternatives for Investment. ...
- 4) Evaluate Alternatives. ...
- 5) Put Together a Financial Plan and Implement. ...
- 6) Review, Re-evaluate and Monitor The Plan.
SIX consolidates, normalizes and enriches financial data covering more than 30 million instruments from more than 1,800 sources around the world. The SIX database covers a range of asset classes and legal entities, delivering price snapshots and detailed funds data for portfolio and fund managers.
What are the 6 components of financial management? ›
Effective Financial Planning involves far more than balancing your bank statement on a monthly basis. Major key elements are Cash-flow management, Investment management, Tax planning, Insurance assessment, Retirement planning, and Estate planning.
What are the 6 areas of financial planning? ›
This article will discuss the six essential types of financial planning that you should be able to provide, including cash flow planning, insurance planning, retirement planning, tax planning, investment planning, and estate planning.
What are the 6 components of a complete set of financial statements? ›
The standard requires a complete set of financial statements to comprise a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity and a statement of cash flows.
What are the key elements of financial literacy? ›
Saving & Investing
Do this by having a savings and/ checking account put away money whenever you are able to on a regular basis. There are many easy ways to save money: Record your expenses through statements and receipts. Budget for savings and limit overspending.
What are the three C's in financial literacy? ›
Character, capital (or collateral), and capacity make up the three C's of credit. Credit history, sufficient finances for repayment, and collateral are all factors in establishing credit. A person's character is based on their ability to pay their bills on time, which includes their past payments.
