Retirement Planning vs Financial Planning
As you plan for the future, you may find financial planning and retirement planning to be similar terms. Although they are connected, they are not the same and have different applications in your financial planning. Falcon Wealth Planning will help you understand the difference between these terms so you can create the right plan for you.
What Is Financial Planning?
Financial planning, in its broad sense, is the general financial management approach. The process is the development of a personal, goal-oriented approach including budgeting and saving, investing and tax planning, and risk management.
Who Needs Financial Planning?
Everyone needs to practice financial planning no matter the age or the income. Young adults can also use financial planning to manage their student loans and begin the process of saving and investing for the future. Financial planning is needed for families when they are thinking of buying a home, saving for their children’s college tuition, or even managing day-to-day expenses. There is still a benefit from a good financial plan for those near or already retired to help manage their cash flow and preserve their wealth. You will be in a good position to achieve most of the things you want to do in your life with a good financial plan.
When Should You Start Planning Your Finances?
It is recommended to start the financial planning process any time you need to control your finances. There are other important reasons to create a financial plan, including when you decide to marry, have a child, buy a house, or even when you get a new job. The more years you have, the higher your money can grow due to the compounding interest. Although some people may embark on the process at an older age, it is still possible to develop a financial plan that can significantly improve one’s economic situation.
What Is Retirement Planning?
Retirement planning is a more specific aspect of your overall financial planning. It is the process of preparing for life after gainful employment. This involves making an estimate of the expenses you are likely to incur in the future, saving for it and even investing the saved funds wisely to generate an income during your retirement. The aim of retirement planning is to assist you to sustaining your standard of living and meeting your expenses as you do not earn a salary.
Who Should Focus on Retirement Planning?
Everyone who expects to retire should practice retirement planning. It is not only for those who are already near retirement age; young professionals can also benefit from this. Thus, if you start your retirement planning early enough, you can benefit from the long-term growth of your investments and create a stronger pension. As you get older, you may have to change your plan because of changes in your income, expenses, and future goals.
When Should You Start Retirement Planning?
Success in retirement planning is only possible if one starts as early as possible. Any amount of time that you have allows your savings to grow more over time through compound interest. Thus, if you start early enough, you are less likely to be affected by market fluctuations. Even if you haven’t started yet, it is important to start now. Changing the savings rate and tweaking the investment strategy can make a huge difference in the financial security during retirement.
How Do Financial and Retirement Planning Work Together?
Although financial planning and retirement planning are related, they are best done together as an overall plan. Financial planning is the overall management of money, while retirement planning is the specific needs of the later years. They together assist in setting short-term and long-term goals, risk management, and developing financial stability. It is possible to consult with a financial advisor in order to find out how to harmonize both areas for your benefit.
Final Thoughts
Both financial planning and retirement planning are crucial to the future. While financial planning provides you with an overall view of your money management, retirement planning is more specific to what you need after you cease working. Knowing the differences between the two can help you make better decisions concerning your money. At Falcon Wealth Planning, we are here to assist you in developing a plan that encompasses both areas and is suitable to your case. If you have any questions or require assistance in getting started please contact us today.
*The content in this blog is for general informational purposes only and does not constitute personalized financial, investment, tax, or legal advice. Falcon Wealth Planning, Inc., a fee-only, true fiduciary, registered investment advisor, provides this information to give a broad understanding of financial concepts and strategies.