Financial planning is time-consuming, dull--and absolutely essential


Personal financial planning is neither mysterious no glamorous. You won't see it on the national news, and it won't make you intriguing and sexier. But it can make you happier and, yes, it can even help you live longer.

And the most important investment decision you will make does not involve money, but rather the commitment you must make to your own future, and the future of your family. It's an investment of time -- the time needed to learn about personal finances, develop a good financial plan that meets your needs and take the steps to execute that plan.

You are not alone here. My files are filled with public-opinion surveys showing how worried we all are about making ends meet during our retirement years. The polls even show that our kids are worried about how they will help support us, especially when many of them will be struggling with the costs of raising their own families.

If you protest that you don't understand business and numbers and investment terms, my response is that it's really not hard to gain this knowledge, if you want to. Self-help guides abound, for a price, in bookstores and magazine racks and for free in public libraries. And I just don't buy the argument that personal finance is too confusing for a newcomer to grasp.

I'm regularly struck by the depth of sophisticated knowledge we unwittingly accumulate about things that really interest us. People who do lots of cooking amaze me with the range of knowledge they can summon instantly about ingredients, their selection and preparation, the proper ways to mix them, the spices and condiments that can be added (and when to add them) and many other facets requiring encyclopedic knowledge.

Sports fans carry around in their heads an incredible knowledge of rules, player histories and numbers. Yet the same baseball fan who has unconsciously mastered a base-nine numbering system for measuring pitching performance (earned run averages being based on nine-inning units) may draw a blank on money issues, saying, "I just don't get along with numbers."

So, while the first step on the road to financial planning is the realization of how necessary it is for a happy future, the closely related second step is the realization that the basics are not all that complicated, if you are committed to taking the time to learn about them.

If you want to kill two birds with one stone, Fidelity Investments has a personal-finance guide for children, complete with activity plans and budget work sheets that kids can complete. It's called "You and Money: A Learning Unit for Children," and can be ordered by calling (800) 544-8666. Maybe you can learn something while helping your children develop some of the personal finance tools that they'll need to appreciate money (yours) and better understand how to make ends meet when they're out on their own.

I hope that the first five installments of this series can also provide you with some of the tools you need. But before you invest in stocks, bonds or mutual funds, and before you become a real estate baron or dazzle us with your knowledge of annuities and insurance products, it's vital to come to grips with more mundane chores -- household budgets and the preparation of at least a rudimentary financial plan.

With your budget under control and with some type of financial road map to guide you, you face at least a fighting chance of achieving your financial goals. Without such preparation, you have literally no chance. Zip. None. Zilch.

Believe it.

Financial Planning

Even if you have enough money to afford the services of a professional financial planner, it's essential that you do enough work on your own to make sure that the planner ends up working for you, and not the other way around.

There's no absolute rule on how much money you should have before it's worth your while to pay someone to help you manage your capital, but I'd say that you should have at least $50,000 in investment funds and that $100,000 would be a more suitable starting point.

There has been terrific growth in the number of people providing financial-planning services, and you can find just about any stripe and shade of planner that you want. But what do you want?

Do you need current income, or would you rather take the bulk of your investment return in the form of appreciation in the market value of your holdings? What's a good mix of investments for you? How much risk are you willing to tolerate when investing the money you're counting on for retirement?

A good financial planner can help you develop answers to these questions that are right for you. But you'd be far better off in the process if you had worked on developing some of the answers yourself before seeking professional advice.

T. Rowe Price Associates publishes an "Asset Mix Worksheet" ** that lets you determine what types of investments might be right for you and possible ways to diversify your financial holdings. Call (800) 638-5660 for a copy.

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