Strategic Financial Planning: A Guide to Planning Your Future

The importance of proper planning can never be over emphasised. A clear plan gives your goals a direction and makes them more achievable.

Consider this: If you want to lose weight, you need to plan your meals, plan when and how to exercise, structure your day so you can get to bed early enough, etc. All of this encompasses a well structured plan; without one, you likely wouldn’t have been able to achieve your goal.

The same applies to your financial wellbeing. No matter where you are in life, or how much you are bringing in each month, a clear financial strategy is what will determine if you are financially successful or not. 

For instance, how you plan for your retirement today will determine how financially comfortable you will be in your retirement. If you have a clear retirement plan, you will be able to put in place proper structures to ensure that you can comfortably afford the basic needs and maybe a holiday or two each year. The ultimate dream comes true.

So what does a strategic financial strategy entail? Let's find out. 

Also read: Are You Stuck in a Debt Cycle? Here Are 6 Tips to Help You Break Away 

What is Strategic Financial Planning?

This is the act of managing your financial matters with the intention to succeed. That is to achieve both your short-term and long-term goals while maximising the value of your money. 

Before you can define your financial strategy, you first need to define your objectives, have a clear view of all your assets (be financially self-aware), and have a good understanding of all savings and investment vehicles at your disposal. 

With this covered, here are tips on how you can draw a kick-ass strategic financial plan that will fire up your future and even your loved-ones’ futures. 

Cash and Debt management

The first step to financial stability and independence involves learning how to budget for your expenditure and maintaining an apt cash flow. You need to find ways to better manage your cash by having a detailed monthly spending budget. 

A clear budget will prevent you from digging into your emergency funds and help you meet your new saving goals. 

Debt management involves strategically planning your finances to get your debts under control. Learn the difference between good and bad debt. You should, however, take on appropriate loans you can afford. Do thorough research before taking a mortgage, car loan, or loan to expand your business.

Cash and debt management will help you analyse all your financial plans vital for your future. Good cash flow will guarantee you liquidity which is essential when investment opportunities arise, and help you save and budget effectively.

Read Also: Coping With Debt: How To Deal With Debt of Any Size

Manage Risks by Having your Insurance in Order

Your income, assets, investments, health, and even life are always at risk when financially planning for your future. These risks can set you back and prevent you from bringing your plans to fruition. 

The best way to mitigate those risks is to access your risk tolerance and exposure and invest in proper insurance. Some must-have insurance covers when planning your future include:

• Health Insurance: It helps you save on medical bills, especially in the event of accidents or chronic diseases. You can get combined medical insurance for your entire family and save on paying premiums.
• Life insurance: This policy will help you safeguard the future of your dependents as your insurer will pay them an annuity. Some insurance companies will pay you a life insurance benefit while still alive if you contract a terminal illness.
• Auto Insurance: Protects you from financial loss if you are involved in an accident, or your vehicle is stolen.
• Homeowners Insurance: This policy will cover damages and destruction to your house and damage or theft of possession. Some companies will include personal liability with this policy for an injury suffered by a third party in your home.
• General Liability: This policy protects you and your business by providing cover against personal injury or property damage on your premise and legal fees that a third party suffers.
• Long Term Care Insurance: This policy best complements health insurance. It covers some vital services a person might need in old age like adult day care, nursing home, home health care, and assisted living. 

Also read: Drastic Changes in Kenya’s Insurance Industry You Need to Know

Education Planning

Education pays. According to research published by BLS, individuals with a higher level of education earn more and are less likely to be unemployed. 

Increasing your level of education should be part of your future financial plans. Getting a master's degree and a Doctorate will better your skill, can increase your employability and propel you up the career ladder. All this will significantly increase your income.

Financial planning also involves planning for your children's education. Planning for a child’s education sets them up with a bright future. 

Incorporating education planning with your financial planning helps you simplify your goals by structuring your finances. It takes the pressure off your back as you'd have invested in educating your child. 

You can plan your child’s education by getting an education insurance cover, setting up a goal-saving or custodial account, and investing in income-generating schemes like real estate and Money Market Funds. Such investments will help you pay school fees and prevent you from dipping into your savings and retirement funds.

Also read: How to Save For Your Child’s Education By Age 

Plan for Your Retirement 

When making financial plans for our future, it is crucial to think of how we will generate income and pay for our expenses when we retire. 

Before you start making financial retirement plans, you need to ascertain a few things. 

1. Figure out your retirement needs - To maintain your standard of living, you will need at least 70% of your pre-retirement income. You need to plan how to generate that income.
2. Decide when you wish to retire - This will help you know how long you need to save and how much you need to contribute to your retirement fund. 
3. Review your assets - You need to review your assets and find ways to leverage them for your retirement benefits. Financial planning for retirement requires that you only hold assets that will be valuable in the future and can benefit you economically.
4. Stay on top of your investments - You should determine the type of investments you want to make based on your retirement needs and goals. Some investments might require that you stay in business even after retirement, while others can generate an income passively.

Also read: Every Young Parent’s Struggle: Planning for Children's Education

Estate Planning

A successful financial plan should be executable if you are incapacitated or passed on. Planning your estate should include having an up-to-date will and appointing a fiduciary to oversee your asset allocation and distribution of inheritance. 

They will also provide the power of attorney if you are incapacitated and act as legal guardians to your dependants.

Estate planning is vital for your future financial plans if:

1. You want to preserve the wealth you acquired in your life after your demise
2. You want to protect your beneficiaries and make sure they all receive fair shares of their inheritance 
3. You want to mitigate disputes and conflicts among beneficiaries like family and business associates, leading to waste of resources.
4. You want to cut costs and taxes associated with passing on an estate.

Read Also: Alive & Not So Well: Who Will Manage Your Finances When You Can't? 

Investment Planning and Asset Allocation

A financial plan is incomplete without an investment plan. An investment plan will help you make sense of your financial strategies and help you create a roadmap to achieving your goals. A solid investment plan should:

• Help you set measurable and realistic financial goals
• Help you constantly invest while seeing returns on your investment
• Help you re-evaluate your financial goals and strategies methodically 
• Make financial decisions while considering their implications on other issues

Asset allocation refers to diversifying your investments and dividing them into different categories. The categories are liquid investments (Cash, Money Market Funds, Treasury bill, and bonds) and illiquid investments (real estate, private company shares, and debt instruments). 

Asset allocation will help you see better returns on investments, cushion you from inflation and losses, and help you mitigate losses.

Also read: What the Crypto Crisis Teaches us About Risk-Taking 

WRAPPING UP

Planning your financial future requires a lot of effort and commitment, but the fruits of those efforts are sweet. A sound and strategic financial plan will help you accomplish your goals, stay debt-free and develop wealth that will benefit you and your generation and dependants. 

Strategically planning your investments can be a demanding task, especially when you are a novice. You’ll be required to conduct extensive research and create a guide that aligns with your future goals. If it proves to be more complex than you expected, you can hire a financial advisor to walk you through all the options available at your disposal.