best approach to financial planning

One needs to take inventory of one's situation. Knowing what your income is, and where the money is going each month is a first step. Then by looking at this information, you can decide if some expenses are out of line, or can't be eliminated. The next step is to have a goal, whether it's a 'final' goal of retiring at a certain age, or smaller goals along the way, buy a house, fund a child's education, etc.

Somewhere along the way is the need to be committed to doing what it takes to getting on the path that will take you to that goal. For some, it's the sacrifice of the smaller car, house, or vacation. For others, it's finding a roommate, or renting out a room in your house. Lastly, there are those who can completelyt fund a retirement by giving up the latte and cigarettes, and brown bagging the lunches.

Given the anonymous nature of these postings, you are welcome to describe your situation and goals, and read the advice the posters here have to offer.

JOE

1. Identify your goals. Typically they fall into the following categories: a) Pay off debts such as car, student, and home loans b) Save for retirement c) Save to buy something else (new car, down payment on a house, a child's college education) d) Ensuring the providers in the family are adequately insured

1. Identify whether you are living within your means and so can save for the items in 1. If not, why not? Use a spreadsheet to compute your monthly expenses. Adjust your income or expenses until you are living within your means and making real progress towards the goals identified in 1.

2. Read, then ask questions about anything you do not understand. E.g. when saving for retirement, should one contribute to a Roth IRA or 401(k), or both?

If you just can't understand the answers to the questions you ask, you can always consider a for-fee financial planner

[list of things that would be useful for us to know]

Actually, before heading off to see any kind of planner, start with writing up an inventory - you're going to need lots of information for the planner - mainly the same thing listed in the previous post. Especially, a list of all assets, all liabilities/debts, reasonable estimates of income and expenses.

Before sinking money into seeing a planner, I'd recommend picking up a book like Personal Finance for Dummies by Eric Tyson. It'll help you put together those lists of assets and such and, assuming you still want to review your things with a professional (still a good idea), you won't be going in there cold.

Here are some questions you need to answer:

1) How old are you now? (I've lulled you into a false sense of how easy this is going to be).

2) How old will you be when you retire?

3) How old will you be when you die? (Every financial advisor needs to know this.)

4) What is the inflation rate? (3% is a popular answer. Feel free to try a higher number as well to see if your retirement plan blows up.)

5) How much will you need to live on when you retire?

6) How much of a lump sum does this represent?

7) How much do you need to save to get to #6?

Feel free to come back as these questions bring up sub-questions. As general advice, the first 5 years of retirement are easy. Don't get overconfident at this point. Having enough money for the last five years of retirement is the tough part. Spreadsheets (XCEL) make this soooo easy to do. I'll never understand why people don't learn to use them. Hmmm, maybe it's that first year high school algebra thing.