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Financial Planning: Create Confidence Amid Uncertainty

Despite its importance, the focus on financial planning tends to run countercyclical to economic conditions. Strong markets may create a sense of complacency, whereas downturns may invite engagement.

Much like businesses synergize processes to optimize their operations, personal financial planning allows individuals to synthesize the work of their different advisors, such as certified public accountants (CPAs), attorneys and investment advisors, to develop a comprehensive strategy that provides stability and confidence in their financial future.

Given the economic environment, financial planning is front-of-mind. Understanding the elements that contribute to a successful strategy are the first steps in efficiently managing this process.

Financial Planning

Developing Your Plan

Data will be used to drive the strategy behind your plan, including items such as account statements, tax returns, legal documents and your long-term goals and short-term objectives.

In preparing to develop a plan, consider:

  • Career Duration. How long you anticipate working or maintaining a steady stream of income to build savings.
  • Longevity. Advances in technology, lifestyles, healthcare and medicine mean you could live longer in retirement.
  • Your Total Financial Picture. A comprehensive plan requires a full view of your income, assets, liabilities, expenses and spending patterns.
  • Inflation. Determine your costs that are subject to inflationary pressures. Inflation can be one of the biggest variables that impacts long-term financial stability by depleting savings to cover short-term expenses.
  • Your Risk Appetite. Risk is inherent with all investments. Assessing your comfort level and the amount of volatility you are willing to absorb in various economic cycles will guide your investment decisions. An aggressive approach will assume higher rates of return but with higher risk, and vice versa.

Prospective Modeling Strengthens Confidence

With a clear understanding of your situation and objectives, plan development begins. Prospective modeling should be central to the process and conducted against all variations of economic circumstances.

In addition to formulating the right plan options to achieve your goals, the modeling process instills confidence by allowing you to see on paper what your finances will look like in a worst-case scenario to avoid surprises in unfavorable market conditions.

Building Resilience

There is no “set it and forget it” in financial planning. Your plan requires ongoing review with your trusted advisor. For example, tactical adjustments can be made to your investment portfolio without changing your overall allocation or risk appetite. Additionally, changes in the tax environment, significant life events or other factors may shift your strategic objectives.

There also may be opportunities to talk with an advisor about adding alternative investments to reduce risk in the overall portfolio and drive incremental return, even in times of economic downturn.

The financial planning process can improve your understanding of market dynamics and confidence in your financial stability. FNB Relationship Managers are dedicated to providing advice and guidance to build the right plan for you.

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