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Financial Planning and Estate Planning- Two Very Different Processes

I've often said, each time I meet with a new person or couple, it's a new experience for me. I never know the questions I am going to be asked, not the issues, both positive and negative that I am asked to remedy. With wealth comes responsibility, and the definition of wealth is as different as the people who bring the issues. Wealth constitutes assets: that which you own vs. liabilities: that which you owe. In figuring out "how wealthy" you are, you also need to take into account your expenses- A person having half what you have may have more free capital because their expenses, our outlays are much less. "Top Line" is defined as how much money comes in..."bottom line" is what’s left after expenses. This brings us to the first topic-financial planning- what it is, and how it pertains to you.

Financial planning is a process that we use to help determine your income vs. expenses, future outlays of money like a house or car, an upcoming roof or furnace replacement, or planning for your next vacation. It has to do with how your money is used to get you through your month to month living as a short term goal, or for long term goals like college planning and retirement planning. Not unlike taking a trip, you have to know where you are going before you set out, or you'll never get there. Well, financial planning has the same reasoning: you have to set goals before you just blindly start saving. Saving without goals is not unlike getting in the car and driving all day: you'll never get there, because you don't know where you're going! Everything I do with my clients is goal driven, so we know if we are on track, ahead or behind. The biggest difference by not setting goals is the closer you get, the harder it is to achieve if you were behind and you didn't know it. If you know how much you are going to need at a given time, annually you can assess your position and adjust if necessary- not easy to do it you are just within grasp of your goal and woefully short. So, set goals, plan, review the plan, and start again…

Estate planning is a different issue. If you have a dollar, you have an estate- and it needs to be planned for. The most common estate planning notion is the "when I die" issue- who gets my stuff? (Remember the George Carlin shtick about stuff? Never mind... back to business). Usually, the first thought is the easy one- if I die it goes to my spouse or partner (if married), then the kids. Easy? Not so fast! What happens if the two of you die in a common disaster... who gets what then? If you have minor children, who will raise them (the surrogate guardians) and how ill their inherence be handled since they are minors (trustees)? Income needs of those left behind, legacy's, special needs for special people, and who's going to take care of Fido and Fluffy? Your money can be used to fund future generations, put an addition on the local firehouse, add an addition on to your church or temple, or create scholarships and grants for multiples of people that do so need our help. Estate planning is the preparation of a plan to decide how and who will use your wealth once you are gone (and presumably done with it). Just like financial planning, it's different for everybody, and working with a seasoned professional who can guide you in setting up your own plan is the way to go, instead of going it alone. Wills, powers of attorney, living wills, health care proxy's, trusts... all a part of the estate planning process, and not all is for everybody. Can you get it off the internet for a buck two fifty? Sure... if that the way you believe everything will go fine once you're gone. Do yourself a favor... work with people who have experience in their field, who have done this hundreds of times before, and can advise you as to the best way to help you achieve your goals. One last thing and let me be very, very clear. Do it- if you don't, you leave a massive mess for your heirs to untangle and settle. I've seen it, it's not pretty, and that's what you'll be remembered for. Really.

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