How big of a yacht can you afford right now? Which investments should you liquidate in order to buy a second vacation home? Those are the questions you should be asking a financial planner, right?

Wrong. Financial planning is not something you start when you have too much money to know what to do with. In fact, there are aspects of financial plans you can start on as early as 18 years old, even without a hefty savings account.



What actually is financial planning?

I’m so glad you asked.

Financial planning is a multidimensional process that covers a lot more than your account balance. Before you start accumulating wealth, you should already have plans in place for debt management, cash flow management, budgeting and risk management.

Many people think financial planning is synonymous with asset management, and therefore start far later in life than recommended.

Where should I start?

Another great question.

As soon as you turn 18, you are legally an adult in the eyes of the U.S. government. Not an adult who can drink a beer, but an adult, nonetheless.

Becoming an adult means it’s time to start estate planning. That doesn’t mean allocating who receives the $12.59 in your checking account if you should meet an untimely death. It means naming a financial and medical power of attorney that you legally give permission to make decisions for you in the event you are not able to make them for yourself.

This is not about assets. It’s about your health. Leave it to a global health pandemic to remind us that we are not invincible.

Understanding your benefits.

At the time you get your first real job, you’ll be offered an employee benefits package. Understanding what it is in it is your next step in your financial plan.

Does your company have a retirement plan that matches contributions? If so, make sure you’re contributing the necessary amount to get that match. Just like that, you’ve started growing your assets.

What about insurances? Find out if your company offers short- or long-term disability insurance so that an illness or injury doesn’t hurt you financially. And NEVER go without health insurance.

Start a conversation.

A huge aspect of financial planning is communication. Having good conversations with your spouse or significant other can pay huge dividends over time. Make sure you are on the same page about financial goals and plans and understand where each of you are as far as debt and credit. If you have kids, talk to your parents to see if they have any plans for starting a college fund for your children.

The lesson:

Financial planning is so much more than asset management and is certainly not just for the rich. Whether you’re fresh out of high school, graduating college, or already years into your career, make sure you’ve started taking meaningful steps to plan for your financial future.

This article was written by Eric Brotman from Forbes and was legally licensed by AdvisorStream through the NewsCred publisher network.

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Kendra Sivertson
Certified Financial Planner
Perspektiv Financial